Student banking: choose an account that works for you

You can get all kinds of perks, from freebies to 0% overdrafts – here’s what’s on offer this year

Young people have had a tough time of it financially over the last two years. That means it is all the more important for those heading off to university to make sure they have got the bank account that works well for them.

You are not required to have a student bank account – you could opt for a standard current account – but those aimed at university-goers offer features you usually can’t get elsewhere.

Student bank accounts often come with a freebie or two, and this year is no exception. However, for many, the key feature is the size of the interest-free overdraft they offer.

“There are undoubtedly some decent account perks this year but students must check the overall package before they commit,” says Rachel Springall, a finance expert at the website Moneyfacts.co.uk.

A lot will come down to how much you expect to need to borrow and what features and perks you think you will actually use.

This year, the pick of the bunch – according to Martin Lewis’s MoneySavingExpert.com and the Save the Student website – is Santander’s 123 student current account.

The bank is offering students a £1,500 interest-free overdraft in years one, two and three, £1,800 in year four, and £2,000 if you stay on to year five. When you open this account, you will get an overdraft limit of £250, and to increase this to £1,500 you will need to register for online banking, plus pay in £500 and continue to pay in at least £500 each academic term.

There are other banks out there offering potentially bigger overdrafts – for example, HSBC says some people will be able to get up to £3,000 in their third year of studies. However, the advertised amounts are often the maximum that is offered. Most banks use “up to” in the wording – that is, you may not get the full amount shown as it will depend on your credit rating – but Santander doesn’t.

Save the Student says: “We believe you’re more likely to get £1,500 out of Santander than HSBC (who advertise £3,000) over the course of your degree.”

Santander also offers a pretty decent perk: a free four-year 16-25 Railcard worth about £90, offering students up to a third off most rail fares. In addition, the Spanish-owned bank came top in Save the Student’s banking survey earlier this year, with a student satisfaction score of 4.39 out of five. Barclays came second with a score of 4.36, while Nationwide was third at 4.34.

On the overdraft front, HSBC says you can get an interest-free limit of up to £1,000 in your first year, which it says “could rise” to £3,000 by year three. As an incentive it is offering £80 in cash, plus either a £20 Uber Eats voucher or a year of unlimited next-day delivery with Asos Premier (the latter normally costs £9.95). To take advantage of this offer, you need to make five debit card transactions within a month of opening your account.

Nationwide’s interest-free overdraft deal is similar: in your first year you can get one of up to £1,000, rising to £3,000 in your third year. Its FlexStudent current account doesn’t come with a sign-up incentive, although one benefit is the fact that there are no charges for using your debit card abroad. You need to pay in at least £500 each term.

It’s not only HSBC dishing out cash as a welcome gift: NatWest is offering £50 cash plus a four-year tastecard – worth about £140 – which lets you get two-for-one meals or 50% off food at thousands of restaurants. NatWest offers an interest-free overdraft of up to £2,000 whatever academic year you are in, although it is limited to £500 during the first term. To be eligible for its current offer, you need to register for mobile or online banking and choose to receive paperless statements within 30 days of opening the account.

The Barclays gift this year is a free 12-month subscription to Perlego, an online library of academic and nonfiction titles, which normally costs £96. Its interest-free overdraft limits are up to £500 during the first term, up to £1,000 in year one, and up to £1,500 in year two and beyond.

The digital bank Monzo is popular with many students but it doesn’t offer a student bank account as such. Eligible customers can get an overdraft of up to £1,000 but you will be charged interest for using it. Monzo charges 19%, 29% or 39% EAR, depending on your credit score. For many people, banks such as Monzo work well for a secondary account for day-to-day spending and budgeting.

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