Top student bank accounts
If you or your children are joining them, finding the right student bank account is vital. And while the freebies that often come with them can be tempting, it's important to think about the bigger picture.
Ruth Bushi, editor at savethestudent.org, says: "If money's going to be tight, forget the freebies when choosing a student bank account. You'll get more mileage out of a 0%, fee-free overdraft, so shop around for the biggest guaranteed buffer.
"It'll cover you in a cash crisis and, unlike other loans or a graduate account, you'll only pay back what you borrow if you stay within the limit. A £1,000 in back-up funds is worth more than a discount card or gig tickets, and is way more flexible."
Here's the Moneywise guide to student accounts.
Most banks let you open a student account if you're over 17 and heading to university. To qualify for a credit card or the generous interest-free overdrafts on offer you'll probably need to be 18 and have lived in the UK for at least three years.
Moneywise and Andrew Hagger of MoneyComms have looked at each of the high street bank's student offerings and rounded up the best deals for borrowers, earners and freebie hunters.
HSBC offers up to £3,000 interest-free overdraft, and has no charges for going over your credit limit. In your first year you'll also get 2% interest on credit balances of up to £1,000.
The associated credit card has a £500 limit, and charges 18.9% APR. This should only be used in emergencies, and balances should be cleared as soon as possible, because there is no interest-free grace period on purchases.
As a bonus of the student account, HSBC offers a £60 Amazon voucher to new customers, and discounts on the new Amazon Kindle Fire.
Moneywise Verdict: With a big overdraft, 2% credit interest and the sign-up bonuses, this one's the best all-rounder.
Santander 123 Student Account
The student version of Santander's flagship 123 account has a £1,500 interest-free overdraft. If you study for longer than three years, this rises to £1,800 in year four and £2,000 in year five. There's a £5 daily charge if you exceed your overdraft limit.
The account's got the best interest rates for larger in-credit balances too. You'll get 1% on interest on between £100 and £200, 2% between £200 and £300 and 3% on balances between £300 and £2,000.
There are no fees for the account (unlike the non-student version) and to tempt you in you'll get a four-year student railcard, knocking a third off your train fares.
Moneywise Verdict: It's the only account offering the coveted student railcard, which costs £30 a year or £70 for three years, and it pays the most interest overall if you've got an in-credit balance. If you're expecting to go overdrawn regularly, you would be better off elsewhere though.
There are no sign-up gimmicks with the Halifax student account and it has a generous £3,000 interest-free overdraft if you qualify for the full amount.
The interest rate for unauthorised overdrafts is 24.2% EAR. In-credit balances receive 0.1% interest, paid monthly.
There's also the option to take the Halifax student credit card, which has a £1,000 credit limit at 19.9% APR. Again, there is no introductory 0% on purchases period.
Moneywise Verdict: No frills and a poor in-credit interest rate but if you're expecting to go into your overdraft you won't be lent more elsewhere.
NatWest's and RBS's student accounts have a £2,000 interest-free overdraft, though it's capped at £500 for the first term. Applicants will need to make sure this is their main account – in practice that means paying in £750 twice a year and making three debit transactions a month. You won't get any interest for balances that are in-credit.
There's a student credit card on offer too. The credit limit is up to £500 with an interest rate of 18.9% APR.
Both include a National Express Young Persons Coach Card, which gets a third off coach travel for four years. The NatWest account also has a CashBack Plus scheme, meaning you'll get 1% back on spending in some retailers.
Moneywise Verdict: It's a good all-round account but not outstanding in any one area. If you travel regularly by coach you'll save with the discount card.
Lloyds has a £500 interest-free overdraft for the first six months, rising to £750 for the next three, and then £1,500 until the end of the third year. If you're studying for longer you'll get a £2,000 overdraft for the next two years. Go over the limit and there's a £6 monthly fee, plus 8.2% EAR interest. You won't receive any interest for in-credit balances.
The Lloyds student credit card charges 19.9% APR and will provide a credit limit of at least £500, subject to credit status.
Sign up with Lloyds and you'll get a three-year NUS Extra card that gives you various discounts including 5% off at Amazon.
Moneywise Verdict: Not bad, but there are better deals elsewhere.
Has a £1,500 interest-free overdraft, which lasts for either the length of your degree or the first six years if you're studying for longer. For the first six months this is capped at £500, and it's £1,000 for the next three. Go over the limit and you'll be charged 8.2% EAR interest.
There's no sign-up bonus but there is a generous 5% interest rate on in-credit balances up to £500.
There is a 19.9% APR student credit card available that has a £500 limit.
Moneywise Verdict: There are better deals elsewhere. The 5% interest is good if you've regularly got a small balance, but the most you'll receive is £25 a year, before tax.
Barclay's Student Account has a £2,000 interest-free overdraft, capped at £1,500 for the first year. If you go over the credit limit there's a 5p0 daily fee if the balance is under £2,000, which rises to a pound if the balance is higher.
There's no in-credit interest, but students with regular earnings could be tempted by Barclays Blue Rewards. There's a £3 monthly fee, but you'll get paid £7 a month if you deposit £800 a month, register for online or mobile banking and set up two monthly direct debits.
There's no student-specific credit card but account holders can apply for other Barclays products.
All student account holders also qualify for SmartSpend cashback from various retailers, including Topshop, Oasis, Boots and Waterstones. They can also access Barclay's LifeSkills finance and career tips online.
Moneywise Verdict: Regular earners will get £48 a year after fees, and the overdraft is one of the better available.
What is a credit rating?
What you need to open a bank account
- Up to two forms of photo ID, such as a passport or driving licence
- Proof of address (your parents' house usually but you can add your term address to the account later)
- Proof of student status, such as your university acceptance letter or UCAS offer letter.
One final tip from Ruth Bushi: "If you're nailing your money management and don't need to get at the [interest-free overdraft] cash immediately, transfer your overdraft funds to a savings account to have it earn you some interest. The bottom line is that this is 'free money' while the overdraft is 0% interest but obviously it will need to be repaid eventually. So make sure you plan ahead."
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.