5 Tips for Choosing a Student Bank Account

Guest post: Save the Student

Getting the right student account should leave you less stressed and better off. Save the Student offers some advice on how to pick a winner.

1. Know what you want your student bank account to do

Simply put, the ‘best’ student bank account is the one that works for you. If you’re after a generous overdraft, you’ll definitely want a ‘student account’ rather than a bog-standard current account. If you want to manage your money from under your duvet, you’ll want one that comes with an app. Pick the features that matter the most and then compare the best student bank accounts on factors such as:

• A generous 0% overdraft 
  
• Interest on positive balances, if you’re the kind to stay in credit
• Low fees for overspending if you’re worried about unexpected costs or staying on budget
• Cash or rewards for opening or regularly paying into an account
• A local branch or smartphone app
• Freebies (but read on for what to watch out for).  

2. Keep an eye on your credit score

Your credit score can affect your overdraft and other banking privileges – a sore point if you haven’t had time to build up a credit history before starting university. There are a couple of obvious things to do if you want to bullet-proof your rating:

• Check your credit file is correct. You can look online for free (try free online services such as noddle.co.uk). 
• Pay bills on time, including for utilities, mobile phone and credit cards.
• Don’t make multiple account or overdraft applications in a short space of time – spread them out a bit.
• Get on the electoral register.
• Arrange an overdraft and stick to the terms: overspending without permission can affect the terms of any future borrowing you want (including extending an existing overdraft). 

3. Go for the largest overdraft allowance 

The average student account usually includes an overdraft facility, which gives you access to the bank’s money if you blow your balance. It’s basically a loan, but – just for students – doesn’t charge interest. If you want to make use of this cost-free buffer, you’ll need to arrange it with the bank first. Overspend without an agreed overdraft and you can be hit with interest rates plus hefty charges. For that reason, it’s worth arranging an overdraft even if you don’t plan on using it right away. And, if you don’t need it immediately, you can transfer the amount to a savings account instead: back-up funds plus extra income that needn’t cost you a penny. 

Top tips:

• Shop around for a bank that gives you the overdraft coverage you need.
• Look beyond advertised overdraft amounts and check what you’ll actually get (‘guaranteed’).
• Don’t just rely on getting an overdraft to get you through your studies. Have a back-up or research other places to get funding, such as bursaries or loans.
• Never spend more than your overdraft allowance. The bank can remove it if you consistently bust the limit, plus you’ll be charged extra fees.
• Don’t go nuts on an overdraft. While it’s cost-free borrowing for now, you will have to pay it back eventually – so have a plan. 

4. Think beyond the freebie 

Who doesn’t love a freebie? No one, that’s who – which is why the banks use them to tempt students in. If the free gift is something you’d buy or need anyway, the savings can be substantial. But if you’re likely to overspend on your student account, you may pay far more in penalty fees over the year than the freebie is worth; cost it out for yourself. Whatever you do, check the reward isn’t something you could get anyway (such as a discount available with your regular student ID). 

Playing the odds? You may be able to get a student account for the freebie and then switch to one with better overall facilities later on. Just check the terms first. 

 5. Be smart, not loyal 

When it comes to savings and ISAs, you don’t have to stick with the bank that does your student account – grab the best possible deal on each one separately. You may even want more than one current account so you’ve got somewhere to stash your loan and then drip-feed it into the account you use for daily spending (much harder to blow it all on special offer stationery that way!).

More than half of all students stick long-term with the bank they first go with – but that only makes sense if you’re getting the best possible deal. If you’re not, now’s the time to see what else is out there and trade-up.