Student guide to banking: Best bang for your buck

PUBLISHED 11-June-2020 · UPDATED 07-June-2020

It’s no surprise that there’s a myriad of banks who want you to house that large lump of a student loan with them. Each will attempt to lure you with promotions and try to reel you in with freebies! It’s not a new tactic and they know students will bite at free stuff.

This bombardment of incentives can make handling your money complicated. Though, it is easier once you break it down. For example, it makes sense to pick a bank with an 0% overdraft that will last you the length of your course if you’re likely to dip into the red. Alternatively, you can choose a bank giving away gift cards and vouchers if you’d prefer free stuff. 

However, putting aside Amazon vouchers for a moment, there are several important factors to consider before you lock in your student banking provider. 

Features to look for

  • Arranged overdraft – Simply put, this means you’re able to spend more than you’ve got up to an agreed amount without interest being added on (often between £500 and £2000 depending on your borrowing power and bank). Yet, it should be underlined that, like all borrowing, it will have to be repaid at some point. Additionally, once you’ve finished your course you’ll have a limited time to pay it back before interest begins to accumulate.
  • Incentives and freebies – Banks will seduce us plentifully by offering free products, discounts and gift cards! However, don’t be blinded by the quick gains; many banks will use something like a Rail Card to hide crappy interest rates or unwillingness to give 0% overdrafts.
  • Interest rates: That little sprinkle of money you get simply for storing your money with a certain bank and being in credit. Naturally, these change like the wind so it’s important to shop around to get the best deal if you’re interested in interest rates. Also, if you’re a keen saver this will be a real benefit.

Some banks will convert your account into a graduate account when you graduate, but not all will automatically. Upon graduation, I’d recommend shopping around for a new account anyway – you never know what perks you might find.

Popular choices

Santander 1|2|3 Student Current Account

This account is generous in its incentives and voted second place in Which? 2019 student bank comparisons. 

Arranged overdraft: For the first three years, you’ll get a guaranteed £1,500 overdraft, abiding that you pay in £500 per term and register for online banking. 

Biggest turn-on: A free 4-year 16-25-year-old Railcard is perfect for a student, and that is exactly what Santander gives you. When it comes to humbly leaving your university digs to visit home or vacate elsewhere in the country to see friends, the 1/3 off rail travel in Britain is a sweet little gain! Whilst you should never make a decision based on freebies, this is probably the best giveaway out there. 

Nationwide FlexStudent

Nationwide are fully aware of the tightness of our money at university, hence why they have designed an account offering a very generous overdraft. As a result, it’s earned them the top place ranking on Which? 2019 student bank comparisons!

Arranged overdraft: Offering first years £1,000 0% overdraft in year one and increasing £1K throughout your three years of study abiding that you pay in £500 per term. 

Greatest selling point: the UK’s only fee-free student current account!

HSBC Student Bank Account

Like Nationwide, HSBC also offers the same money incentives with their 0% overdraft! 

Arranged overdraft: Up to £1,000 interest-free in year one, which can grow to £3,000 by your third year.

Their biggest flex: They often offer student-exclusive perks from deals on takeaways to discounts on mobile phones.

Barclays Student Additions Account

Receive up to 10% cashback when shopping at participating retailers, such as Adidas or Boots! However, offering no interest rate or other perks isn’t very attractive.

Arranged overdraft: up to £500 when you open your account which can increase to £3,000 by your third year of study.

Frivolous but fancy: With Barclays, you can personalize your debit card for free. It might not make you save any money, but it is good to be different. 

NatWest Student bank Account

Arranged overdraft: NatWest offer up to £2000 interest-free overdraft abiding you pay in £500 in the first term. This is the same for RBS and Ulster Bank too given they are partnering banks. 

Plentiful perks: Like Santander, NatWest knows what students like when it comes to perks. With the choice of one of the three; Amazon Prime Student, National Express Coachcard or a Tastecard+, the benefits are fruitfully tasteful. 

Be cautious of…

  • What’s beneficial for one person might not be good for you. It is all subjective and depends on what is right for you!
  • If you are hoping to gain substantial interest on your loan, consider formats outside of student accounts. Explore ISA’s and other savings accounts to make the most of your cash.
  • There is a temptation with an interest-free overdraft to spend on miscellaneous items and treat it as ‘free money’. It isn’t (unfortunately).
  • With interest rates likely to fluctuate as-and-when, avoid using this as a depending factor in picking your new home for your money or be ready to move accounts if you’re hit with an interest rate reduction.

*Information is correct at date of article posting*

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