Money

Best student bank accounts of 2020, including free four-year railcard and up to £3,000 interest-free overdrafts


STUDENT bank accounts are specifically aimed at people who are studying at college or university, helping them to navigate their finances at a time when managing money can be tricky.

Here is all you need to know about how to apply for a student account, and what the best deals on the market are at the moment.

Banks are starting to roll out incentives to sign up to their student bank accounts

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Banks are starting to roll out incentives to sign up to their student bank accountsCredit: Alamy

What is a student account?

Student accounts are specifically set up by banks to appeal to people studying in the UK.

The main difference between a normal current account and student accounts is the overdraft facility.

Some student accounts allow you to go up to £3,000 into your overdraft without making you pay any interest – essentially functioning as an interest-free loan.

But remember an overdraft isn’t free money

After you graduate you still have to repay everything you have borrowed and interest may kick in on graduating.

Plus, if you go beyond your authorised overdraft limit – the limit you agreed with your bank on setting up the account – you might face additional charges.

If you think this might happen, you should speak to your bank immediately, as it could hurt your credit rating and ability to borrow in the future.

Who can apply for a student account?

Most student accounts require you to be either over 17-years-old or over 18, and you’ll need to have been accepted onto a full-time UCAS course at a UK institution lasting at least two years.

You also can’t already have a student account with another bank, and you will need to be a UK resident.

However, do check the eligibility criteria for the account you are applying for just in case.

What perks do accounts offer?

Because of stiff competition between banks and building societies, some offer freebies to tempt you into opening their account.

This could include discount cards, cashback offers or subscriptions.

But think carefully about whether these things are worth it – and work out exactly what you will save if you choose to go with a certain provider.

Make sure the bank account you choose offers all the features you need first, before you are swayed by free gifts.

Having access to an interest-free overdraft can help you manage your money

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Having access to an interest-free overdraft can help you manage your moneyCredit: Alamy

What are the best student accounts at the moment?

We’ve rounded up the student accounts with the highest interest-free overdraft limits and the best perks to help you decide which one you might go for.

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Barclays Student Additions Account – interest-free overdraft of up to £3,000 plus cashback offers

If you’re a UK student, this account will give you an overdraft of up to £3,000 interest-free.

The maximum amount you can borrow is £500 in your first term, rising to £1,000 in the rest of your first year, £2,000 in your second year, and £3,000 in your third year and any subsequent years.

The bank also offers various cashback offers – at the moment it is offering 10 per cent cashback for selected high street retailers.

And it is a bit of a gimmick, but the account also lets you add your favourite photo to your contactless debit card for free.

Once you graduate Barclays will move you onto its graduate account – and this also offers interest-free overdrafts of up to £3,000.

Lloyds Student Account – £2,000 interest-free overdraft and 15 per cent cashback offers

With Lloyds’ student account you can apply for an interest-free arranged overdraft of up to £1,500 in years’ one to three of your course, and up to £2,000 in years four to six, if you’re still studying. 

You will also get 15 per cent cashback from certain retailers, including Co-op, Costa and Sky, when you spend on your Lloyds debit or credit card, or set up a direct debit from your student account.

Once you’ve left your course, Lloyds will automatically move you to a graduate account, which also offers interest-free overdrafts of £2,000 in your first year after graduating, £1,500 in your second year, and £1,000 in your third year.

Nationwide FlexStudent – up to £3,000 interest-free overdraft

Nationwide claims its student account is the UK’s only fee-free account – and it won’t charge you any fees even when using your debit card abroad.

It also doesn’t charge interest on overdrafts, and you can arrange a £1,000 overdraft in your first year, rising to £2,000 in your second and £3,000 in your third.

Unlike some other accounts, it doesn’t offer any extra freebies.

And keep in mind that once you finish your course, you will be automatically moved onto a graduate account.

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Here, your overdraft will still be interest-free but you will have to start paying it back, and your overdraft limit will be reduced each year.

Natwest/ RBS Student Account – pick from three different rewards

The NatWest and RBS Student Account offers account holders a £500 interest-free arranged overdraft in the first term, which then rises to £2,000.

You can also pick from three different rewards when you open the account.

One is Amazon Prime Student membership for a year, which usually costs £3.99 a month, plus a £10 Amazon gift card.

Or you can choose a four-year National Express Coachcard, giving you a third off coach travel, which would otherwise cost £12.50 a year.

Or you can pick a Tastecard valid for four years, giving you two for one off food in participating restaurants, which would usually cost £34.99 a year.

Be warned – like most providers – NatWest and RBS will automatically switch you to a Graduate Account once you finish your course.

Although it provides the same £2,000 interest-free overdraft in the first year, the limit then drops to £1,000.

After two years, you will be moved onto a Select Account, which will charge you almost 20 per cent in interest on any overdraft.

Santander 123 Student Current Account – get a four-year railcard for free

Santander’s student account comes with a free four-year 16-25 railcard, giving you a third off when you buy an off-peak rail ticket in the UK.

Usually these cost £30 for one year or £70 for three years – so if you use the train a lot this could add up to a significant saving.

You can also get an interest-free arranged overdraft of £1,500 in the first three years you have the account, £1,800 in year four and £2,000 in year five – if you stay a student that long.

The account also offers up to 15 per cent cashback with some high street retailers including Costa, Morrisons and Vue cinemas, which you earn when you spend on your Santander debit card.

It will also pay you a monthly interest of 1 per cent on account balances up to a maximum of £2,000.

In order to qualify for the account, you’ll need to pay in at least £500 in each academic term, from a student loan, job or other income.

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Once you are no longer a student you will be automatically transferred to a 123 Graduate Current Account, which also comes with an arranged interest-free overdraft of up to £2,000.

TSB Student Bank Account – almost 5 per cent interest on your balance

TSB’s student account offers you a better rate of interest on your savings than others on the market.

You will get 4.89 per cent interest on up to £500 paid monthly.

You can also apply for an interest-free arranged overdraft of £500 in the first six months, which can then be increased to £1,000 in months seven to nine, and to £1,500 from month ten onwards.

When you’re no longer eligible for the student account, it will be converted to a graduate account, which comes with an interest-free overdraft of up to £2,000 for the first three years.

If you open this account, you can also apply for a TSB Student credit card with a minimum limit of £500.

This gives you 56 days interest free on purchases if you pay off the balance in full every month by the payment date shown on your statement, although if you don’t, you will be charged interest of 19.9 per cent.

In May, it emerged that university students will have to pay full tuition fees even if their courses are taught online from the autumn.

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