All of the big banks and financial institutions work hard to get students to open accounts with them. They try to attract students by offering them inducements such as freebies and even cash. These incentives might be tempting, but you need to look at the whole package to see if an account is right for you.
The reason banks are eager to attract students is because then know that if treated well many of them who eventually graduate will become long term customers. They also realise that students can go on to become high earners, making them the kind of customer that banks want to keep hold of.
This page is an in-depth guide to student bank accounts, it will give you a comprehensive understating of what to look for in a account, what to avoid and what questions to ask.
What are student accounts
They are special bank accounts specifically developed for people in higher education (university level). They are designed to help students get through university by taking the pressure of their finances, for instance by not charging them exorbitant amounts of interest.
The benefits of having a student account
It can help you to start building up your credit rating.
Free banking (there is no charge for using your account)
Interest free overdrafts
You will get a debit card, which will allow you to withdraw cash from ATM’s and pay for shopping.
Many of the major banks have branches on the campuses of universities, making it easy and convenient for students to access their money.
If you do borrow money then any interest charged on it tends to be lower than on other bank accounts.
Incentives that banks use to attract students
Some banks have special promotions which they use to attract students. Below is a list of what they can offer you;
Free bus or train travel cards.
Membership of organisations.
Free tickets to concerts.
Free mobile phones
Free holiday insurance cover
Vouchers to use in High Street stores.
Cash payments made to you.
Option to apply for a Credit Card.
Free home contents insurance.
AA (or similar) membership
Apart from in branch banking with a student account you will usually also get free;
Use your mobile phone to keep track of your account while your on the go. By using secure online banking you will be able to;
Transfer money between accounts
You can also use Mobile Banking to find your nearest branch or ATM while you’re out and about
Gives you the chance to speak to a bank representative quickly and over the phone. It’s a quick and effective way to;
Change your address details
Open a new current or savings account
Get more information about a banks products and services.
This is an easy to use facility and ideal for logging on 24/7 and checking your account from anywhere.
Access to emergency cash
In the case of you losing your debit card it can be arranged for you to get emergency cash from an ATM.
Monthly / Quarterly paperless statements
Your statements can be emailed to you rather than be sent through the post.
Free Text Alerts to help you manage your money. You’ll get account updates straight to your mobile phone, so you’ll always know what’s happening with your money.
Standing order and Direct Debit facilities
These are safe and speedy ways to pay regular bills.
Key points to note
Always try to remain within your overdraft limit.
Remember that when you apply for a bank account your current credit rating will be checked.
Before opening your bank account you may be asked to deposit some money in it.
Read the small print so you know about fines and how to avoid them.
Try to find the bank that will give you the biggest 0% overdraft deal possible.
Questions to ask before opening a bank account
All the major UK banks offer student accounts, but it’s a good idea to compare the different deals available to find the right one for you. Below are a few important things to ask before you choose an account:
Will I have to deposit any money in the account to open it, and if so then how much?
Do I have to use regularly i.e. make a certain amount of transactions every month?
Is there a overdraft facility, and if so how much is it for and what are the charges for it?
How do I apply for the student current account? As a new customer can you do it online, over the phone or do you have to apply in a branch?
Are there any iPhone Apps for your account?
What gifts or incentives are they offering?
Does the student account have online or telephone banking services?
What happens to your student account when you graduate?
Can I use the cashpoint card at other banks' machines without being charged?
Does the bank have a dedicated student advisor?
Will I receive interest on credit balances?
For how long after my course has completed can I expect to receive preferential student terms?
Criteria for opening up a bank account
This may vary from bank to bank, but below is a list of the typical criteria for opening up a bank account;
You are a full time student in higher education in the UK.
You are studying for a degree / equivalent or post-graduate course.
You are a UK resident.
You may have to agree to have the Student Account as your main current account and agree to deposit a certain amount of money in there every month.
You may have to make a certain amount of transactions every month.
What are overdrafts
These are facilities that allow students to spend more money than they have in their accounts.
The amount you can take out will be set beforehand and although some banks many not charge interest others will, so you should always enquire about costs. Also remember that if you go over any agreed overdraft limit then you can incur additional financial penalties.
Overdrafts are popular because many students will find it hard to always stay in credit, however you are advised to always look carefully at the interest free limits that apply.
Also remember that you may not automatically be eligible for an overdraft as it depends on your personal circumstance and credit rating.
Questions to ask about any overdraft facility
If you go over your overdraft limit is there a grace period. For instance if you go over the limit today will you have until say 3.30pm tomorrow to pay in enough money to avoid any overdraft fees you may incur that day?
Is any Interest-free overdraft available for the length of your course or is it only for a limited period?
Are there any overdraft arrangement fees?
Can I extend my overdraft limit and how do I do this?
Do I need to attend an interview with the student adviser before an overdraft can be arranged?