Understanding Student Bank Accounts

4th October 2013 Chris Clark Careers and Finance

0% interest overdrafts, free travel cards or shopping vouchers – every year the big banks look for new ways to entice new students. Undoubtedly you will come across bank adverts claiming to have the best student bank account but don’t fall into the trap of taking the first one you see. We give you the lowdown on the current student bank accounts and what you will get for your money.

Don’t be balled over by the freebies. Sure, a free student railcard will be useful for getting back home to the parent’s and a £50 shopping voucher would come in handy but it is important to look at the small print.

What to Look Out For?

When it comes to student current accounts, often banks will not charge fees but how long will they hold off for before they do? The first thing to look at with student bank accounts is overdraft limits and interest rates.

The leading banks, like HSBC, Santander and Natwest, tend to have the biggest overdraft limits but smaller chains like Co-Op may be able to offer better deals. As is usually the case with student bank accounts, interest rates will only kick in once you have graduated but after then some banks charge a hefty sum once you go over your overdraft limit so that is something to look into when doing your research.

The Banks:

Santander is giving away a free Young Person’s Railcard which will last four years and is worth £120. Provided at least £500 goes into the account each term, a £1,500 arranged overdraft will be made available in years 1, 2 and 3. 1% interest will be made on balances over £500.

Barclays offers a 10% discount on student possessions and travel insurance and offers a £2,000 interest-free overdraft whilst you study. The maximum overdraft limit is £3,000 but any overdraft over £2,000 will incur a charge.

Royal Bank of Scotland will give you a free tastecard membership which offers 2 for 1 or 50% of meals. Plus, a £2,000 interest-free overdraft subject to the length of the degree course. During the first year of your degree you can apply for a £1,000 interest-free overdraft.

HSBC will give students aninstant £500 interest-free overdraft on opening the account. After which a £3,000 interest-free overdraft will be made available, subject to status and account conduct.

Lloyds TSB offer a free NUS card for up to 3 years and £75 off a holiday booking with student travel experts STA Travel. Additionally, in years 1 to 3 a £1,500 interest-free and fee-free tiered planned overdraft is available.

Halifax offers interest of 0.1% to students on a £3,000 interest-free overdraft from the first year.

Co-Op will give students a £1,400 interest-free overdraft in year one and up to £2,000 in year three.

The Verdict:

Banks have and will continue to tempt students with incentives. They know that a student that takes out an account with them is unlikely to switch banks once they graduate. This student year, banks have chosen more practical incentives meaning that students will find a genuine use for the things on offer.
A stand-out freebie from bank’s offerings in 2013-2014 is the free Young Person’s Railcard. Provided you qualify for the maximum amount, both HSBC and Halifax offer the biggest interest-free overdrafts. But, remember you will need to pay this off eventually so the biggest doesn’t always mean the best.
Remember to read the small print before you tie yourself down to one bank and it’s always worth sitting down with a representative from a number of banks to find out which one will best work for you.

Chris Clark

Chris Clark

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