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The best student bank accounts – and how to pick one

Less than one week from now, school leavers across the country will be finding out their A-Level results and, more importantly, where they’ll be heading to University.

There are now estimated to be 2.5 million students enrolled at UK higher education institutions, according to Universities UK.

With many learning to manage serious amounts of money for the first time, this is big business for banks. 

So as the start of the new academic year draws near, they are once again battling it out to woo freshers and undergraduates alike into opening an account with them. 

Do your homework: Young adults starting university are eligible for a student account that often comes with benefits and interest-free overdrafts

They might not be stashing away savings right now, but banks are keen to snap up today’s students because, when they hopefully start earning graduate salaries, they can be valuable customers for decades to come.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: ‘Student account providers have not held back with tweaking their perks this year, which are enticing and could save students some cash.

‘Unlike last year, two banks are offering a free cash incentive upon opening, namely HSBC with £80 and NatWest with £50, which was unheard of in 2020 for student accounts.

‘Since the last academic year there is a better variety of perks, so students can debate which type of account will give them the most value based on their spending habits.’

Students can therefore find plenty of cost-saving perks – but they would be wise to consider which account best suits their spending habits before committing.

Things like overdraft limits, interest charges and overseas transaction fees can all make a dent in their budget if they are caught unawares. 

This is Money has balanced the perks and the terms and conditions to pick out some of the best options for those heading to university next month.

What are the perks?

Students can benefit from a free 12-month subscription to Perlego – an online library containing over 500,000 academic and non-fiction books.

A Perlego subscription usually costs £96 a year, so this could be a considerable bonus for a student looking to save some money on study materials.

Most banks either prevent students from exceeding their arranged overdraft limit or wont charge them for doing so - but it's important to double check to avoid any nasty surprises

Most banks either prevent students from exceeding their arranged overdraft limit or wont charge them for doing so – but it’s important to double check to avoid any nasty surprises

The Barclays app also gives you lots of ways to track your spending – for example, allowing you to compare how much you spend at shops and other businesses month by month.

How big is the overdraft? 

Barclays provides an interest-free buffer of £500 during the first term.

But this increases up to £1,000 in the first year and then up to £2,000 in Year two and finally up to £3,000 in the third year and beyond.

Barclays does not offer unarranged overdrafts, so you will not be able to exceed your overdraft limit. 

What to watch out for 

When using your Barclays debit card abroad you’ll be hit with a 2.99 per cent transaction fee for any payment or cash withdrawal.   

Can I apply? 

To apply you’ll need to be at least 18 and in full-time higher education, or a higher apprenticeship (level 4+).

What are the perks? 

Students can earn up to 15 per cent cashback at selected retailers, including the Co-op, Costa and Sky, simply by registering for Everyday Offers via their online banking.

The account also comes with promotional code that will enable students to enjoy a free TOTUM card for up to three years.

A TOTUM card gives students access to over 350 UK discounts on the high street and online at places like the Co-op, Fender, Halfords, Garmin, Odeon and Grenade.

The card would otherwise cost £24.99 for the same time period. 

The account also comes with a free International Student Identity Card, allowing access to over 150,000 international discounts in over 130 countries including numerous London tourist attractions.

How big is the overdraft? 

Students can get up to £1,500 in years 1-3 and up to £2,000 in years 4-6.

The overdraft starts at £500 for the first six months, then you can apply to increase it to £1,000 in months seven to nine, and up to £1,500 from month ten.  

Unarranged overdraft requests are reviewed on a case by case basis and, where they are authorised, no charges are applied. 

What to watch out for

Students may decide to look for the biggest fee-free overdraft they can find if they are set to live on a tight budget

Students may decide to look for the biggest fee-free overdraft they can find if they are set to live on a tight budget

When abroad you will be subject to a foreign currency transaction fee of 2.99 per cent for every payment or cash withdrawal you make.

Can I apply? 

You can apply if you’re aged 17 or over, but to apply for an arranged overdraft you must be 18 or over.

You also need to have lived at a permanent UK address for the past three years, and be studying on a full-time course that lasts for at least two years, or on a one-year access course leading on to a full-time degree.

What are the perks? 

Those who register for Everyday Offers can earn up to 15 per cent cashback at selected retailers, including the Co-op, Costa and Sky, but to benefit they will need to activate the offers they’re interested in online.

For keen savers, the account enables students to round up card payments and put the spare change from each purchase into a Halifax savings account.

How big is the overdraft? 

It allows for an interest-free arranged overdraft up to £1,500 for the length of the course, plus an extra year after graduation – up to a maximum of 6 years in total.

Unarranged overdraft requests are reviewed on a case by case basis and, where they are authorised, no charges are applied. 

HSBC are offering students a £80 cash incentive and the choice of a £20 Uber Eats voucher or a year of unlimited next-day delivery with ASOS Premier

HSBC are offering students a £80 cash incentive and the choice of a £20 Uber Eats voucher or a year of unlimited next-day delivery with ASOS Premier

What to watch out for 

When abroad you will be subject to a foreign currency transaction fee of 2.99 per cent for every payment or cash withdrawal you make.

Can I apply? 

To apply for this account you’ll need to be aged 18 or over and on a degree course or equivalent full-time education.

What are the perks? 

This HSBC account comes with a tantalising £80 cash bribe, which itself could be enough to sway some students to join.

It also offers the choice of a £20 Uber Eats voucher or a year of unlimited next-day delivery with ASOS Premier, worth £9.95 a year.

To qualify, students need to make five debit card transactions within a month of opening the account.

How big is the overdraft? 

Students get an interest-free limit of up to £1,000 in their first year, which could rise to £3,000 by their third year.

Both arranged and unarranged borrowing is charged at 0 per cent on student accounts. 

However, if a student does go over their arranged overdraft limit HSBC will consider an unarranged request and will make the payment if it can, subject to status. 

What to watch out for 

If an account holder pays for something using their HSBC Visa debit card while outside the UK, they’ll need to pay a non-sterling transaction fee of 2.75 per cent per transaction.

If they withdraw money from an ATM outside the UK, they’ll also need to pay a ‘non sterling cash fee’ of 2 per cent. This is limited to a minimum and maximum charge of £1.75 and £5.00 respectively.

Can I apply? 

To qualify you need to be 18 or over and to have lived in the UK, Channel Islands or Isle of Man for at least three years.

You can’t have another student account elsewhere, and you will need proof you’ve been accepted on to a qualifying course at a UK university or college.

TOTUM offers include

  • 10 per cent off at The Co-op                    
  • 25 per cent off Odeon student-priced tickets                                                
  • Discounts from Apple, 16-25 Railcard, LOOKFANTASTIC, Superdrug, New Look, Jack Wills, Zavvi, PizzaExpress, ASOS, CrossCountry Trains, Missguided, Domino’s, Thorpe Park and lots more

What are the perks? 

Avid savers can round up their card payments to the nearest pound, with the difference being transferred to a Lloyds Bank savings account.

Students can also get up to 15 per cent cashback with Everyday Offers when using the card at selected retailers including the Co-op, Costa and Sky.

Those who open their account by 31 October can also enjoy a free TOTUM card for up to three years.

How big is the overdraft? 

With a Lloyds Student Account, customers can apply for an interest-free tiered arranged overdraft of up to £1,500 in years one to three and up to £2,000 in years four to five.

The overdraft starts at £500 for the first six months, then they can apply to increase it to £1,000 in months seven to nine, and up to £1,500 from month ten. 

Unarranged overdraft requests are reviewed on a case by case basis and, where they are authorised, no charges are applied. 

What to watch out for 

When abroad you will be subject to a foreign currency transaction fee of 2.99 per cent for every payment or cash withdrawal you make.

Can I apply? 

You can apply for this account if you’re 17 or over and have been a resident in the UK for at least three years.

You’ll also need to show you’ll be studying full-time on a course of at least two years’ duration, or a one-year full-time access course leading to a degree.

What are the perks? 

This could be a great card for those who expect to travel during their time at university, as Nationwide’s card is free to use abroad.

Along with Barclays, it is also one of the best accounts on the market for overdrafts.

By the end of a three-year university course, customers of Nationwide can get up to £3,000 interest-free, provided they request an increase every year.

Watch out for the overdraft trap

While many banks will simply block students from exceeding their interest-free buffer, some will charge student borrowers overdraft rates of close to 40 per cent if they borrow too much. 

For example, TSB – which offers a fee-free overdraft of up to £1,500 – will charge 39.9 per cent if students exceed that. 

Its account pays 5 per cent interest on balances of up to £500, so it may be better suited to those who plan to keep their account in credit. If it’s a large overdraft they are after, students can find higher interest-free limits elsewhere.

It is also worth noting banks will not necessarily give applicants the maximum fee-free overdraft they advertise on their websites. The limit can often be based on the student’s credit score. 

Students should check their score before they apply (it is free to do so) and try and improve it if they can.

If students don’t have any other borrowing, they can try and give their score a boost in other ways, such as by registering to vote, or registering their mobile phone contract in their own name rather than a parent’s. 

The buffer is £1,000 in year one and £2,000 in year two, and unlike some other accounts, students will get the full amount if they are accepted for an overdraft, rather than a potentially lower limit. 

How big is the overdraft? 

Students can request up to £1,000 in each year of study, to a maximum of £3,000 in the third year. 

FlexStudent is designed to prevent students from going over their arranged overdraft limit. 

Can I apply? 

Customers need to be 18 or over and not have a student account with another provider – although they can switch an existing student account over to Nationwide.

They must also have been accepted onto a full-time UCAS course of at least 2 years in the UK, and have an unconditional offer.

In addition they will also need to pay in at least £500 each term from the date they open their FlexStudent account.

What are the perks? 

Similar to HSBC, both NatWest and RBS are whetting the appetite of students with a cash bribe – though they are only offering £50 rather than £80. 

Also on offer is a four-year tastecard membership, giving students the chance to get two meals for the price of one, or 50 per cent off their food bill, at thousands of UK restaurants – as well as discounts at the cinema.

A tastecard membership usually costs £34.99 a year, so this could equate to a total  £139.96 saving over four years for someone who is likely to take advantage of this perk. 

How big is the overdraft? 

Both NatWest and RBS allow for an interest free overdraft up to £2000, although during the first term this is limited to £500.

Both accounts will prevent students from being able to dip into their unarranged overdraft.  

Natwest and RBS are offering both a £50 cash bribe and a four year tastecard membership to lure students in.

Natwest and RBS are offering both a £50 cash bribe and a four year tastecard membership to lure students in.

What to watch out for 

The foreign currency conversion fee for payments and withdrawals outside the UK is 2.75 per cent of any transaction.  

Can I apply? 

Students must be 17 or over and a British Citizen who has been living in the UK for at least 3 years.

They need to be a full time undergraduate student on at least a two year course at a UK University or College, or completing a full-time postgraduate or nursing course lasting a year or more.

What are the perks? 

The big money saver with this account is a free, four-year 16-25 Railcard, which will enable students to shave a third off their rail travel in the UK.

A 16-25 Railcard costs £30 each year to renew, so over a four year period it could save a total of £120.

Once they switch on Retailer Offers in online or mobile banking, customers will also be able to choose which offers to save to their card and benefit from up to 15 per cent cashback when they spend in those stores.

How big is the overdraft? 

Santanders allow for an interest-free arranged overdraft of £1,500 in the first three years, £1,800 in year four and £2,000 if they stay on to year five.

Santander's 123 Student account has long been seen as one of the best offers around, with a free four-year 16-25 Railcard thrown in.

Santander’s 123 Student account has long been seen as one of the best offers around, with a free four-year 16-25 Railcard thrown in.

When a customer tries to make a payment that would take them into an unarranged overdraft, Santander makes the decision on whether to allow or reject the payment based on their individual circumstances. 

If it allows a payment, it will take them into an unarranged overdraft, but it does not charge interest or fees for unarranged overdrafts on the account. 

What to watch out for 

The foreign currency conversion fee for payments and withdrawals outside the UK is 2.95 per cent of any transaction. 

However, the bank does not charge a fee for withdrawals from Santander cash machines in Spain. 

Can I apply? 

Students must be 18 or over, live in the UK permanently, and be able to pay in at least £500 per academic term.

They need to be studying or about to begin an undergraduate course that is at least two years in length, or a level four to seven apprenticeship.

If they are about to begin a course, they must have an unconditional or ‘confirmed conditional’ offer before they apply.

Customers must not already have an existing Santander current account, and if they do, they will need to transfer it to a student one.

What are the perks? 

TSB is one of the only interest-earning accounts, and will pay five per cent interest on balances up to £500.

How big is the overdraft? 

Your overdraft starts at £500 for the first six months, then you can apply to increase it to £1,000 in months seven to nine, and up to £1,500 from month ten.

What to watch out for 

Those who exceed their arranged overdraft limit, will incur interest rate charges at 39.99 per cent.

There is also a 2.99 per cent foreign transaction fee when using the card abroad.

However, if students have a ‘spend and save plus’ account there are no transaction fees. 

Can I apply? 

To have a student account you must be 17 or over (18 or over if it includes an overdraft); have been a resident in the UK for at least three years; and be studying for a full time course that lasts for a minimum of two years, or a one-year access course leading onto a full-time degree.

What about the digital banks? 

By George Nixon

Smartphone banks Monzo and Starling have snapped up millions of young customers who are used to banking solely on their mobiles with no need for branches, or even online banking.

While students may be attracted to them as money management services to help keep track of their incomings and outgoings, it is worth noting neither bank offers a dedicated student account, although Starling and Monzo offer accounts to 16 and 17-year-olds.

That means they don’t offer the same sizeable interest-free overdrafts as some of the accounts mentioned above, so if someone plans on using their overdraft frequently it could get expensive.

Starling charges between 15 per cent and 35 per cent depending on a customer’s credit score, and Monzo between 19 per cent and 39 per cent.

Read more at DailyMail.co.uk