Best student bank accounts 2014

With A-level results just around the corner, many school and college leavers will be starting to gear up for their first year at university.

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But, as well as buying your books and kitchen utensils – you’ll also need a student bank account. There’s a whole host of deals out there this year – but look carefully as some will be more up your street than others.

 

What to look for in a student bank account

For most freshers, an interest-free overdraft will be the most important feature of their bank account at uni, though there’s other features to look out for too, including:

*Money-saving perks such as online discounts, cashback and discount railcards

*User-friendly online banking and mobile apps that will help you manage your money

Let’s take a closer look at what the big banks are offering for 2014…

1. Interest-free overdrafts

The most generous interest-free overdrafts this year come courtesy of HSBC and Halifax. Both banks allow you to borrow up to £3,000 at 0% over your time at university.

Barclays, Lloyds, Santander, NatWest/Royal Bank of Scotland and Co-operative Bank all offer up to a maximum of £2,000 interest free, while TSB will limit you to £1,500.

But, unlike in previous years, not all banks offer this borrowing as a ‘right’. Overdraft applications are now often ‘subject to application’ – which means you’ll be assessed on how well you have managed your account in the previous year/s.

Banks may also look at your credit score which can be affected by how well you manage any outstanding credit you have – and this includes mobile phone contracts.

Charges for going over your agreed overdraft limit (known as unarranged overdraft charges) also vary.

Halifax, for example, charges interest at 24.2% APR whereas it will cost you £5 a day with Santander (capped at five charges a month) until you bring your balance back into line.

On the other hand, HSBC has NO charges for unarranged borrowing at all.

 Our favourite for 0% overdrafts: HSBC

2. Interest on credit balances

Few students carry credit balances throughout the year. But in-credit interest could still be a boon when you receive your student loan.

The highest rate is from TSB, which pays 5% - but only on the first £500 which needs to be paid in monthly. And HSBC pays 2% on the first £1,000 in the first year.

For more consistent balances, Santander pays up to 3% (on credit between £300 and £2,000) – which we think is the winner.

 Our favourite for in-credit interest: Santander

3. Upfront freebies

Some banks offer upfront freebies to attract your banking custom when you are at university – but some are more useful than others.

This year’s offer from Barclays and Halifax for example, to personalise your debit card with a picture of your choice is fun – but will do nothing to help your cash go further.

Much more useful is Santander’s four-year 16-25 railcard which saves a third on your train fares and would otherwise cost you £30 a year. Great if you intend to travel home frequently. You'll only be eligible for the railcard if you deposit at least £500 into yor account each academic term.

HSBC is offering a £60 Amazon gift certificate – and £70 off a Kindle Fire HDX – which you can use in conjunction with each other. 

Then there’s Lloyds which is offering a three-year NUS Extra card while NatWest/RBS are giving away a year’s Tastecard worth £80 that gives you discounts in restaurants around the UK.

 Our favourite for freebies: Santander


4. Online banking/mobile apps

All student bank account providers offer online banking and mobile apps – and they will all allow you to transfer money to a friend using just your smart phone. Useful if you need to pay your share of the electricity bill to your housemate, for example.

But the NatWest/Royal Bank of Scotland app also allows you to withdraw cash from an ATM without your card if it is lost or stolen which could come in very handy on a night out.

The Lloyds app, meanwhile, can show you the nearest ATM and be used to claim cashback while TSB’s Online Money Planner can help you keep track of your spending.

 Our favourite for mobile apps: NatWest/RBS

5. Credit cards

Using a credit card wisely can help you to build up a good credit score for later life. It can also get you out of a tight spot financially, for example when you’re waiting for your loan to come through.

TSB has a student credit card that allows you to borrow up to £1,000, while HSBC and Lloyds have cards on which you can borrow up to £500.

But take very good care! The interest rates on credit are eye-wateringly high. TSB and Lloyds charge an APR of 19.9% if you hold a debt on the card, while HSBC charges 18.9%.

 Our favourite for credit cards: TSB
(although if you don’t pay off your balance every month, you’re best off without one at all!)

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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