Beginner’s guide to student accounts

All packed and ready to set off for uni? Student loan burning a hole in your pocket? Read this first

It pays to research the deals available on student accounts (Getty)

Results are in, clearing is done and across the UK a new crop of newbie undergraduates are getting ready to start university life. At every freshers’ fair across every student campus, banks and building societies will be trying to win their custom and sign them up to current accounts.

Some may even offer freebies like music vouchers, popcorn machines and even hard cash, because banks know how profitable students can be. After all, in this country we’re notoriously bad at switching current accounts – research from Bristol University shows that only 4 to 6 per cent of people switch their bank account in any one year. So if the banks can bag a fresher there’s a good chance they’ll have their business for decades, if not life.

But a free smoothie maker or even a wad of cash won’t make up for opening the wrong account. If an undergrad needs to rely on an overdraft or use their account a certain way, then signing up to the wrong deal can cost them a lot of money. So what are the main points to consider and what accounts are available? We’ve been taking a closer look…

Overdrafts

It’s obviously better if students can keep out of the red, but some undergrads will simply need to rely on an overdraft to manage their money while they study. Some student accounts offer fee-free and interest-free accounts and anyone who thinks they’ll be using an overdraft needs to pick an account that doesn’t charge for credit.

However, it’s also a good idea to look at accounts that increase the amount a student can borrow over the years of study, rather than letting them max out their account in the first term and spend the rest of their degree struggling.

For example, the Nationwide FlexStudent account provides an overdraft of up to £3,000 interest-free and fee free. However, account holders can only apply for the extra credit as they progress through their course – a maximum of £1,000 in the first year, £2,000 in the second and up to £3,000 in the third.

The Co-Operative Bank student account has a maximum overdraft of £2,000 but all its account holders get a limit of £1,400 in their first year, so it has a higher initial overdraft.

Students need to bear in mind that an overdraft is something they should use only if they have to – all that money will need paying back at some point. Also, going over the overdraft limit should be avoided at all costs as this can lead to high penalty charges and could affect their credit rating.

Freebies

Okay, a smoothie maker and iTunes voucher may not be a good reason to consider an account but some providers offer more useful freebies like insurance or special deals. If a freebie will actually save money in the long run then it’s worth factoring it in.

As an example, both the NatWest Student Bank Account and the RBS Student Bank Account come with a free National Express Young Person’s Coachcard, valid for four years. That gives students 1/3 off standard coach fares across the UK, so it’s good for undergrads who need to travel.

The Santander student account includes a free four-year railcard, saving a third off train travel, so that could also be tempting.

Convenience

Another important aspect for students is whether their account is easy to manage, especially online and by phone. With the best will in the world, most students won’t have the time or inclination to trek to a branch to manage their money, and providers have responded by developing some really easy ways of keeping in touch.

For example, RBS and NatWest account holders provide 24-hour UK call centres, online banking and a mobile app. The Nationwide FlexStudent account also provides 24-hour call centres but can also send free text alerts to keep the student up to date on what they are spending.

Having said that, on some occasions it will be necessary to visit a branch and so checking there’s one within easy reach of campus is also important.

This article was produced in association with MoneySuperMarket.com