Managing your finances as a student can be challenging, especially if you are living away from home for the first time.
Between paying for tuition, accommodation, and living expenses, it’s easy to see why many students struggle to make ends meet. That’s where student bank accounts can come in handy.
In the UK, many banks offer student bank accounts that are specifically for students. These accounts often come with some useful features such as interest-free overdrafts, low or no fees, and other benefits that can make managing your money easier. They also can come with some extra gifts like railcards. But before you sign up for a student bank account, it’s important to weigh the pros and cons.
Find out more about student banking today and the best student bank accounts today:
Pros of Student Bank Accounts
Of course, there are lots of advantages to having a special bank account for students. Here we talk about the main ones.
One of the main benefits of a student bank account is the interest-free overdraft. An overdraft is when you spend more money than you have in your account, and the bank allows you to borrow the extra amount up to a certain limit. With a student bank account, this overdraft facility is often interest-free, which means you won’t have to pay any interest on the amount you borrow.
This can be a huge advantage for students who may have irregular income or unexpected expenses. For example, if you need to pay for a train ticket home for the holidays, but you don’t have enough money in your account, you can use your interest-free overdraft to cover the cost. Just be sure to repay the overdraft as soon as possible to avoid paying any fees.
Low or No Fees
Another advantage of student bank accounts is that they often come with low or no fees. For example, many student accounts offer free debit card transactions, free ATM withdrawals, and no monthly account fees. This can help you save money on basic banking services, which is especially important when you are on a tight budget.
Some student bank accounts may also offer other benefits, such as free mobile banking, free text alerts, and discounted travel insurance. These perks can add up over time and help you save money on everyday expenses.
Discounts and Other Benefits
Some student bank accounts come with additional perks such as discounts on entertainment, travel, and shopping. For example, you may be able to get discounted tickets to events or access to exclusive deals from partner companies.
These benefits can be a nice added bonus, especially if you are looking to save money on things like movie tickets, gym memberships, or travel. Just be sure to read the terms and conditions of these offers carefully to ensure that they are actually useful to you.
Having a student bank account and using it responsibly can help you build a good credit history. Your credit history is a record of your borrowing and repayment activity, and it’s used by lenders to determine whether you are a reliable borrower.
By using your student bank account responsibly, such as by paying your bills on time and staying within your overdraft limit, you can demonstrate to lenders that you are a responsible borrower. This can be beneficial when you apply for credit in the future, such as for a loan, credit card, or mortgage.
Cons of Student Bank Accounts
On the other side of the coin there are some disadvantages to having a bank account for students and it’s only right to discus them here to give this article a balanced perspective.
Temptation to Overspend
One potential drawback of student bank accounts is that the availability of an interest-free overdraft can lead to overspending. It can be tempting to use your overdraft to buy things that you can’t afford, especially if you know that you won’t have to pay any interest on the amount you borrow.
However, using your overdraft to fund your lifestyle can lead to debt and financial difficulties in the long run. It’s important to remember that an overdraft is not free money and that you will eventually have to pay it back, along with any fees or charges that may apply.
To avoid falling into this trap, it’s important to have a budget and stick to it. Know how much money you have coming in each month and how much you need to spend on essential expenses such as rent, bills, and groceries. Then, allocate a certain amount for discretionary spending, such as going out with friends or buying new clothes.
If you do need to use your overdraft, try to keep it to a minimum and repay it as soon as possible to avoid accruing any fees or charges. You can also consider using other forms of credit, such as a credit card or personal loan, but be sure to compare the different options and read the terms and conditions carefully.
Another potential downside of student bank accounts is that they may not offer as many features as regular bank accounts. For example, you may not be able to access certain types of investments or savings accounts, or you may not have access to a dedicated account manager.
This may not be an issue while you are a student, but it could become a problem once you graduate and start working. If you anticipate needing more advanced banking services in the future, you may want to consider opening a regular bank account instead.
To open a student bank account, you may need to undergo a credit check. This is a process where the bank checks your credit history to assess your creditworthiness.
If you have a poor credit history or no credit history at all, you may be denied a student bank account, or you may be offered a more limited account with higher fees and fewer features. Additionally, the credit check itself can impact your credit score, especially if you apply for multiple accounts or loans within a short period of time.
To avoid this, it’s a good idea to check your credit score before applying for a student bank account. You can do this for free through a credit reference agency such as Experian or Equifax. If your score is low, consider taking steps to improve it, such as paying off any outstanding debts or closing unused credit accounts.
Fees for Using Your Overdraft
While many student bank accounts offer interest-free overdrafts, some may charge fees for using your overdraft or for going over your limit. These fees can add up quickly and can be a burden if you are already struggling to make ends meet.
To avoid paying these fees, be sure to read the terms and conditions of your student bank account carefully. Know what your overdraft limit is and how much you will be charged if you go over it. Also, be sure to repay your overdraft as soon as possible to avoid accruing any additional fees or charges.
What are the best UK Student Bank Accounts?
The best UK Student bank accounts are:
Santander 123 Student Current Account
The Santander 123 Student Current Account offers a range of benefits, including a four-year 16-25 Railcard, which gives you a third off rail travel in the UK, and a range of cashback offers. You can also get a tiered overdraft of up to £2,000 interest-free in the first three years, and up to £3,000 interest-free in the fourth year.
HSBC Student Bank Account
The HSBC Student Bank Account offers a £500 interest-free overdraft in the first year, which can increase up to £3,000 by your third year of study. You also get a £60 Amazon voucher when you open the account, and access to a range of discounts and offers through the HSBC Student Exclusives programme.
Barclays Student Additions Account
The Barclays Student Additions Account offers a £500 interest-free overdraft in your first year, increasing up to £3,000 by your third year of study. You also get access to the Barclays Blue Rewards scheme, which pays you cashback for using certain Barclays products and services.
NatWest Student Account
The NatWest Student Account offers a range of benefits, including a four-year National Express Coachcard, which gives you 1/3 off coach travel in the UK, and a range of cashback offers. You can also get a tiered overdraft of up to £2,000 interest-free in the first year, up to £2,500 in the second year, and up to £3,000 in the third year.
Lloyds Bank Student Account
The Lloyds Bank Student Account offers a tiered overdraft of up to £1,500 interest-free in the first year, up to £1,800 in the second year, and up to £2,000 in the third year. You also get a free NUS Extra card, which gives you access to a range of discounts and offers.
When choosing a student bank account, be sure to consider factors such as the interest rate on the overdraft, any fees or charges that may apply, and any additional benefits or perks that the account offers. You should also consider your own financial circumstances and choose an account that suits your needs and helps you to manage your money effectively.
Final Thoughts about a Best Student Bank Account
Student bank accounts can be a helpful tool for managing your finances while you are studying. They offer benefits such as interest-free overdrafts, low or no fees, and other perks that can make your life easier. However, it’s important to weigh the pros and cons before signing up for a student bank account.
Be sure to read the terms and conditions carefully, and compare different options to find the account that best suits your needs. Also, use your account responsibly and avoid overspending or accruing unnecessary fees or charges. By doing so, you can set yourself up for financial success both during and after your studies.