What is a student account?
A student current account is designed to help undergraduates meet the financial demands while they’re at university.
The student banking market is big business for banks because they know once they’ve got you you’ll probably be a customer for life.
Student accounts tend to be loaded with fresher-friendly deals, like interest-free overdrafts, discounts on computer equipment and music, and even rail discount cards. But don’t be lured by freebies alone. Take time to compare student bank accounts and find the best deal for you.
Who do student bank accounts suit?
As the name suggests, student bank accounts are aimed at those studying at university.
Not only are many of the product features geared towards the needs of students, such as interest-free overdrafts, but the main banks also have advisers who are specially trained to deal with problems and issues students often face when they’re managing their finances for the first time.
Benefits of student accounts
For many, debt is synonymous with life at university. However, on the plus side students have access to cheap borrowing in the form of Student Loans and most student accounts offer interest-free overdrafts which help reduce the burden of the debts that many rack up while they’re doing their degree.
For many students, the free overdraft is the main benefit they look at when it comes to choosing who to bank with. It’s advisable to look for an account with tiered overdraft limits. While you may not be able to borrow as much in year one, this type of account tends to be better unless you have great self-discipline and budgeting skills. The danger if you go for an account that offers the same interest-free limit in each year of study is that you could find yourself stuck if you overspend in your first year and reach your limit.
Student accounts offer other benefits which are geared to life at university including various discounts and freebies (these depend on which account you sign up for).
While the terms of a student account end shortly after graduation, the preferential rates and benefits don’t. Your bank will usually transfer you onto its graduate terms, giving you some time – usually three years – to pay down your student debts while still benefiting from a free overdraft.
It’s worth pointing out that you do not have to stay with your existing bank – you can switch at any time and still take advantage of the student or graduate terms offered by another provider.
Student banking negatives
Don’t be tempted to exceed your overdraft limit; you’ll be knocked sideways by high interest and penalty fees. Talk to your bank first and try and agree a higher limit.
Student bank accounts come laden with freebies and extras you won’t use, so make sure you’re signing up to the best student bank account for you and not being swayed by useless free gifts.
Alternatives to student current accounts
You don’t have to open a specialist student account if you go to university. However, most undergraduates do because of the features and benefits they offering – the key one being the interest-free overdraft facility.
There are alternatives though, and if you are fortunate enough not to need an overdraft, you might prefer to go for a standard current account that pays more interest on balances in-credit. Be aware however, that many current accounts now require you to pay in a salary each month so you may not qualify unless you are earning.