Introduction to Open Money Club's guide to Student Banking

Off to uni? Before you hit the student union it's worthwhile getting some personal admin done by choosing a student bank account. This is probably the first time you've ever had to think about banking seriously, and it can seem like a bit of a minefield. But, alas, do not fear! We are here to help.

The first thing you should know is that banks LOVE students, so you will probably see a lot of marketing directed at you from now until you finish your studies from various student bank accounts. They love you because acquiring you for a student bank accounts increases the chance that you'll use them for personal banking in the future. You may already have a cash card or under 18s bank account, in which case it could be worthwile upgrading. Use the table below to compare the best student bank accounts.

In our guide to student banking we aim to give you the tools you need to compare the best student accounts, let you know our favourites and give you a few explainers. You might also be interested in our guide to banking for teens or our guide to graduate accounts.

3 things you should probably consider

1

Student Overdrafts. Interest free student overdrafts are a key feature of student bank accounts. Typically, student bank accounts offer between £1,000 and £3,000 interest free, which can be a huge help if you need some extra cash to get you through your studies. Remember, the limits advertised by banks are often not guaranteed and are likely decided on a case-by-case basis. We'd always recommend having a good budget and sticking to it before going into unplanned debt. Check out our overdraft explainer for more info.

2

Interest Earned on Savings. So while most cash-strapped students will be taking advantage of interest free student overdrafts, perhaps you actually expect your account to be in the black during your studies. In that case, you may want to look at accounts which offer the best rates on in credit balances. Check out our interest earned on savings explainer for more info.

3

Freebies. To further spread the love, student bank accounts often come bundled with freebies. While we won’t be advocating that you make important financial decisions depending on whether or not your student account comes with a cuddly toy, some of the freebies, like railcards, can be pretty useful. Check out our freebies explainer for more info.

Our Picks

NatWest Student Bank Account

NatWest's account is a great all-rounder. You can get up to £500 interest free overdraft in your first term and up to £2,000 by the end of your first year. You'll also get a Young Person's Coachcard, valid for 4 years, and the option of a credit card

HSBC Student Bank Account

HSBC's student account has a whopping £3,000 theoretical interest free overdraft limit. You will automatically get £500 on sign up, but the rest is determined case-by-case. The account also comes with cashback rewards and the option of a credit card

Nationwide Flex Student Account

Nationwide's student account offers an interest free overdraft of £1,000 to start with, increasing to £3,000 in your third year. The account is completely fee-free, so you won't get any nasty surprises no matter what

Compare the short list of student bank accounts

NatWest Student Bank Account

1st Year
Overdraft
Limit:

£2,000

3rd Year
Overdraft
Limit:

£2,000



Perks:

Free Young Persons Coachcard

NatWest Student Bank Account offers an initial potential overdraft of £500, increasing to £2,000 while you study. Also offers a free Young Persons Coachcard and a student credit card. Be careful, you will be charged fees on unpaid transactions, but not on unarranged overdrafts.

HSBC Student Bank Account

1st Year
Overdraft
Limit:

£3,000

3rd Year
Overdraft
Limit:

£3,000



Perks:

Exclusive student offers

HSBC Student Bank Account offers a guaranteed overdraft limit of £500, potentially increasing to £3,000 while you study. Also offers an a student credit card and access to exclusive student offers. As a plus, you won’t be allowed to over-withdraw, so no nasty fees.

Nationwide Flex Student Account

1st Year
Overdraft
Limit:

£1,000

3rd Year
Overdraft
Limit:

£3,000



Perks:

Cashback rewards

Nationwide Flex Student Account offers an initial potential overdraft of £1,000, increasing to £3,000 while you study. Also offers 1% interest on balances up to £1,000 and cashback rewards. As a plus, you won’t be allowed to over-withdraw, so no nasty fees. In fact, the whole account is completely fee free for students.

Barclays Student Additions Bank Account

1st Year
Overdraft
Limit:

£1,000

3rd Year
Overdraft
Limit:

£3,000



Perks:

Personalised debit card & cashback rewards

Barclays Student Additions Bank Account offers an initial potential overdraft of £500, increasing to £3,000 while you study. Also offers a personalised debit card and cash-back at select retailers. As a plus, you won’t be allowed to over-withdraw, so no nasty fees.

Santander 123 Student Current Account

1st Year
Overdraft
Limit:

£1,500

3rd Year
Overdraft
Limit:

£1,500



Perks:

Free 4-year 16-25 Railcard

Santander 123 Student Current Account offers a potential overdraft limit of £1,500 while you study. Also offers a free 16-25 Railcard and up to 3% interest on balances up to £2,000. Beware: you will be charged a daily fee on unarranged overdrafts.

TSB Student Bank Account

1st Year
Overdraft
Limit:

£1,500

3rd Year
Overdraft
Limit:

£1,500



Perks:

--

TSB Student Bank Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. Also offers a student credit card and 5% interest on balances up to £500. Beware: you will be charged a daily fee on unarranged overdrafts.

RBS Student Bank Account

1st Year
Overdraft
Limit:

£2,000

3rd Year
Overdraft
Limit:

£2,000



Perks:

Free Young Persons Coachcard

RBS Student Bank Account has an initial potential overdraft of £500, increasing to £2,000 while you study. Also offers a free Young Persons Coachcard and a student credit card. Be careful, you will be charged fees on unpaid transactions, but not on unarranged overdrafts.

Halifax Student Current Account

1st Year
Overdraft
Limit:

£1,500

3rd Year
Overdraft
Limit:

£1,500



Perks:

Cashback rewards

Halifax Student Current Account offers a potential overdraft limit of £1,500 while you study. Interest free overdraft will remain in place for the first year after you graduate. Also offers 0.1% AER on bank balances and some cashback extras. Beware: you will be charged a monthly fee and interest on unarranged overdrafts.

Bank of Scotland Student Current Account.

1st Year
Overdraft
Limit:

£1,500

3rd Year
Overdraft
Limit:

£1,500



Perks:

Cashback rewards

Bank of Scotland Student Current Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. Beware: you will be charged a daily fee on unarranged overdrafts.

Lloyds Student Current Account

1st Year
Overdraft
Limit:

£1,500

3rd Year
Overdraft
Limit:

£1,500



Perks:

Cashback rewards

Lloyds Student Current Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. Also offers cashback rewards. Beware: you will be charged a daily fee and interest on unarranged overdrafts.

What's in the table? Our summary table in a non-exhaustive list of just some of the major products out there. We’ve tried to keep the column headers to a minimum, while providing you with the information we think you will care about the most. Before opening any bank account, you should be sure that you do a full review of the product on its website and thoroughly read the terms and conditions. None of the information in this table is designed to provide advice, but only to empower you to help make your own decision. If you have any suggestions on how we can improve our table or you think we are missing something important, please drop us an email.

NatWest Student Bank Account


NatWest Student Bank Account offers an initial potential overdraft of £500, increasing to £2,000 while you study. Also offers a free Young Persons Coachcard and a student credit card. Be careful, you will be charged fees on unpaid transactions, but not on unarranged overdrafts.


Year 1 - Interest free overdraft: £2,000
Year 3 - Interest free overdraft: £2,000
Perks: Free Young Persons Coachcard


Apply


HSBC Student Bank Account


HSBC Student Bank Account offers a guaranteed overdraft limit of £500, potentially increasing to £3,000 while you study. Also offers an a student credit card and access to exclusive student offers. As a plus, you won’t be allowed to over-withdraw, so no nasty fees.


Year 1 - Interest free overdraft: £3,000
Year 3 - Interest free overdraft: £3,000
Perks: Exclusive student offers


Apply


Nationwide Flex Student Account


Nationwide Flex Student Account offers an initial potential overdraft of £1,000, increasing to £3,000 while you study. Also offers 1% interest on balances up to £1,000 and cashback rewards. As a plus, you won’t be allowed to over-withdraw, so no nasty fees. In fact, the whole account is completely fee free for students.


Year 1 - Interest free overdraft: £1,000
Year 3 - Interest free overdraft: £3,000
Perks: Cashback rewards


Apply


Barclays Student Additions Bank Account


Barclays Student Additions Bank Account offers an initial potential overdraft of £500, increasing to £3,000 while you study. Also offers a personalised debit card and cash-back at select retailers. As a plus, you won’t be allowed to over-withdraw, so no nasty fees.


Year 1 - Interest free overdraft: £1,000
Year 3 - Interest free overdraft: £3,000
Perks: Personalised debit card & cashback rewards


Apply


Santander 123 Student Current Account


Santander 123 Student Current Account offers a potential overdraft limit of £1,500 while you study. Also offers a free 16-25 Railcard and up to 3% interest on balances up to £2,000. <strong>Beware:</strong> you will be charged a daily fee on unarranged overdrafts.


Year 1 - Interest free overdraft: £1,500
Year 3 - Interest free overdraft: £1,500
Perks: Free 4-year 16-25 Railcard


Apply


TSB Student Bank Account


TSB Student Bank Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. Also offers a student credit card and 5% interest on balances up to £500. <strong>Beware:</strong> you will be charged a daily fee on unarranged overdrafts.


Year 1 - Interest free overdraft: £1,500
Year 3 - Interest free overdraft: £1,500
Perks: --


Apply


RBS Student Bank Account


RBS Student Bank Account has an initial potential overdraft of £500, increasing to £2,000 while you study. Also offers a free Young Persons Coachcard and a student credit card. Be careful, you will be charged fees on unpaid transactions, but not on unarranged overdrafts.


Year 1 - Interest free overdraft: £2,000
Year 3 - Interest free overdraft: £2,000
Perks: Free Young Persons Coachcard


Apply


Halifax Student Current Account


Halifax Student Current Account offers a potential overdraft limit of £1,500 while you study. Interest free overdraft will remain in place for the first year after you graduate. Also offers 0.1% AER on bank balances and some cashback extras.<strong> Beware:</strong> you will be charged a monthly fee and interest on unarranged overdrafts.


Year 1 - Interest free overdraft: £1,500
Year 3 - Interest free overdraft: £1,500
Perks: Cashback rewards


Apply


Bank of Scotland Student Current Account.


Bank of Scotland Student Current Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. <strong>Beware:</strong> you will be charged a daily fee on unarranged overdrafts.


Year 1 - Interest free overdraft: £1,500
Year 3 - Interest free overdraft: £1,500
Perks: Cashback rewards


Apply


Lloyds Student Current Account


Lloyds Student Current Account offers an initial potential overdraft of £500, increasing to £1,500 while you study. Also offers cashback rewards. <strong>Beware:</strong> you will be charged a daily fee and interest on unarranged overdrafts.


Year 1 - Interest free overdraft: £1,500
Year 3 - Interest free overdraft: £1,500
Perks: Cashback rewards


Apply


Explainers for Student Bank Accounts

Student Bank Accounts

What exactly is a student bank account?
Really, a student bank account is just like any other bank account that you will have at any other point in your life - you’ll get a debit card and will likely have the usual online or telephone banking options as well as touch payments, Apple Pay and any other payment options currently in trend. Accounts are usually free of monthly charges and you'll be able to withdraw from most ATMs for free.

What makes student bank accounts different?
On top of the standard features, student bank accounts come packaged with a bunch of perks which are designed to attract students, such as interest-free student overdrafts and a variety of freebies.

Who can open a student bank account?
Most student bank accounts are available to anyone who is aged 18 and over (some accept 17 year olds, but you will not get access to overdrafts) and is on a further education course which is at least a two-year course (or has an offer of acceptance from UCAS). Some accounts will also require you to have been resident in the UK for the last 3 years, so if you have recently moved to the country you should double-check each bank’s policy here.

Can I have more than one student bank account?
Banks generally will require your student bank account to be your main account and sometimes will specify minimum amounts that you will need to deposit into the account. This will also be a factor on whether you can retain and increase your student overdraft limit.

Will my student bank account cost me anything?
Not usually, no, it won’t cost you to open a student bank account. All of the student bank accounts on this page are free to the consumer.



Student Overdrafts

A unique feature of student bank accounts are interest free student overdrafts. So what is a student overdraft, how do they work and why should you care?

What is a student overdraft?
A student overdraft is where you spend more money from your student bank account than you actually have. This means that you are effectively borrowing money from your bank and your bank balance will be in negative numbers or ‘in the red’.

An arranged student overdraft is where you have previously agreed to an ‘overdraft limit’ with your bank. Student bank accounts are fairly unique in that banks offer fairly large interest-free student overdrafts, which means you can benefit from an arranged overdraft, typically between £1,000 and £3,000, for free. Free money! To put this into context, standard current accounts usually offer an interest-free overdraft of between £0 and £250.

Beware unarranged student overdrafts...
Unarranged student overdrafts are pretty self explanatory. This is where you withdraw more money from your student bank account than you have and more than the overdraft limit you have agreed with your bank. Many student bank accounts will simply cut you off before you withdraw too much, but others may slap you with high interest rates and fines. It’s important you check this with your bank, but it’s best to just discipline yourself to not withdraw more than your arranged overdraft. You can use the table above to compare student bank accounts and check out some of the high level terms associated with student overdrafts.

Remember, most student overdraft limits advertised are not guaranteed
To most students, overdrafts are a valuable source of cash and flexibility to help them through their studies. It might be tempting to just go for the student bank account with the highest potential overdraft limit, but it’s important to remember that these headline figures are subject to your personal circumstances and may be decided on a case-by-case basis

Which student bank accounts offer the best student overdrafts?
Different banks have different approaches to their interest-free student overdrafts. Some have a guaranteed portion, which is what you will automatically get when you sign up, but others will decide everything on a case-by-case basis. Here’s a few high level facts about some bank accounts:

  • HSBC offers a £3,000 theoretical student overdraft in year 1 of your studies, but requests for the max will be judged on a case-by-case basis, so don’t base your entire decision on this! HSBC does guarantees a £500 overdraft on sign-up though.
  • Some accounts increase their maximum overdraft limit over time too. For example, Nationwide offers £1,000 potential interest-free student overdraft in Year 1, increasing to £2,000 in Year 2 and £3,000 in Year 3.



Freebies with Student Accounts

Of all the bank accounts on offer, student bank accounts are among those that offer the most free stuff bundled with your account in the form of sign up incentives and other perks.

Why do student bank accounts come with freebies?
Students have a high potential lifetime value to banks, which means they compete pretty heavily to lure students to their accounts over their competitors.

Which student bank accounts come with the best freebies?
While we shouldn’t base important financial decisions based on the sign up incentives that banks offer, they are something you should consider as one of the factors which will help form your decision.

  • Cash-back / points are offered by a lot of student bank accounts and are dependant on spending with certain brands. This can sound attractive, but the monetary benefit may be limited in practice.
  • Santander, NatWest and RBS all offer free 4 year railcards with their accounts. This can be a huge and real benefit to students who intend to travel a lot.
  • Barclays offers a personalised debit card, which you can customise with a personal photo. Absolutely no monetary benefit, but kind of fun nonetheless.



Student Banks on Campus

Many University campuses will have a local bank branch that you can visit.

Should I open a student bank account from the branch on campus?
From a purely financial perspective, whether or not a bank has a physical location on campus shouldn't affect your decision on which student bank account is right for you. Ultimately, you should chose your student bank account after weighing up the options and student bank accounts can be easily opened online or on the phone if you prefer.

Having said that, some people simple prefer to have a branch nearby where they can go and speak to a human person about their student bank account. This is just a personal preference.



Charges & Fees on Student Bank Accounts

Should I care about interest rates charged on student bank accounts?
For most bank accounts, it’s really important that you know exactly what interest rates you will be charged for things like overdrafts. But since student bank accounts offer student overdrafts free of interest charges, it’s not such a big deal for you students.

What about interest rates on unarranged overdrafts?
While you may have a large interest-free student overdraft limit, you may accidentally withdraw more than your arranged limit. Of course, your default position should be that you don’t go over your agreed limit and can live blissfully unaware of what rates your bank would charge otherwise, but it’s probably worth figuring out what you will be charged just in case.

If you check your accounts terms and conditions, they will let you know exactly what these charges will be. Sometime banks charge a flat fee of say £5 per day, and others will charge a flat interest rate of say 20%. Some will charge a combination of an interest rate and a fee.

Do all student bank accounts charge for unarranged student overdrafts?
Some student bank accounts will actually just stop you from going overdrawn in the first place, which means you don’t have to worry about going overdrawn and being charged. This can be incredibly useful if you’re not as on top of your bank balance as you’d like to be.

  • The best: Banks which simply stop students from going overdrawn, so you don’t get a nasty surprise, include: HSBC, Barclays and Nationwide.
  • The worst: Students should be careful with certain student bank accounts, where you will be charged by the day / month for going overdrawn: Bank of Scotland, TSB, Halifax, Santander and Lloyds.
  • The rest: Other student bank accounts fall somewhere within this range. For example, RBS and Natwest will charge for unpaid transactions, but not unarranged overdrafts.



Interest Earned on Savings

If you are a student who plans to be in credit within your account, as opposed to overdrawn, firstly, well done you, and secondly, you should check which student bank accounts offer the best interest rates you can earn on savings.

What is AER?
Interest rates are often quoted in AER, which stands for Annual Equivalent Rate. AER is designed to make comparing interest rates easier. The calculation assumes that you keep earning interest over a year and takes into account factors such as compound interest. The bottom line is, when you want to compare interest rates, look for the AER number to ensure you are comparing apples to apples.

Which student bank accounts offer the best interest rates?
In terms of student bank accounts, Santander (3% on balances up to £2,000), TSB (5% on balances up to £500) and Nationwide (1% on balances up to £1,000) will all pay interest on in credit balances. The best account for you will depend on how much you expect to have in your bank account.

Having said that, if you don’t plan on benefitting from interest-free student overdrafts, you may be better off putting your savings elsewhere.

What are my other options for earning interest on my balances?
If you don’t plan on benefitting from interest-free student overdrafts, your banking options expand a little. Depending on how high a balance you expect to have in your account, it may be worth just getting a normal personal current account, or even looking at more formal savings options like ISAs. Perhaps start by checking out our guide to personal banking or our guide to saving and investing if you expect to have more significant savings.



Credit Cards for Student Bank Accounts

In addition to interest-free student overdrafts, some student bank accounts also offer credit cards (typically with a limit of around £500).

Should I get a student credit card?
If you can, you’re better off just sticking to your interest-free student overdraft, as using credit cards can result in you being charged interest. However, credit cards may be useful if you are looking for a little bit of cash flow flexibility.

How should I think about student credit cards?
If you pay off the full balance on your credit card each time your bill is due, you will be able to avoid paying interest. This can be useful if you need a little bit of cash flow flexibility to get you through a short period of time. But requires discipline.

Other options for your credit card are paying off the “minimum amount”, which means you will be charged interest on the rest. Since you will probably have an interest-free student overdraft, this should always be your first port of call.

What student bank accounts offer credit cards?
If credit cards are important to you then banks like NatWest, RBS, HSBC and TSB offer them with their student bank accounts.



Bank Accounts for Post-Grad Students

What if i’m a postgraduate student?
Student bank accounts will generally extend to postgraduate students too and some will even allow a higher interest-free student overdraft limit in subsequent years of study. If you are a post-grad student you should check your account’s terms and conditions, or speak with a bank representative to ensure you know exactly what’s going on.



Student Bank Accounts when you Graduate

What banks do with your student bank accounts after you have completed your studies differs, so you should be sure you fully understand what’s going to happen.

What happens to my student bank account when I graduate?
Usually, your bank will automatically convert your student bank account to a graduate bank account when once you've finished your studies. Some student bank accounts will give you an extra year of interest-free student overdraft joy, while others will taper off over a few years.

What should I do when I graduate?
Check the terms and conditions of your student bank account, or speak to a bank representative to make sure you are absolutely clear what is happening with your account. In any case, when you graduate you should be reviewing your account and check for the best deals out there again.

You can learn more in our guide to graduate bank accounts.