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Heading off to university is an exciting time, and for many, it is their first chance to live independently. There are a lot of things that need to be organised before anyone can begin this new adventure.
One aspect of student life that many young people often struggle with is managing money. With student loans, rent and utility bills to manage, it can all become very confusing.
Student bank accounts are designed to help students handle their finances effectively, as well as giving them various perks and promotions to help through university life. This guide explains what a student bank account is, how to choose the right student account, and how to open a student bank account.
A student bank account is a type of current account that is designed specifically for students at university. They are offered by all major banks and building societies and work very similarly to their usual current accounts.
The critical difference is that a student bank account will generally come with various other benefits including freebies, discounts and an interest-free overdraft. The overdraft feature is one of the most essential elements to consider, and some banks will offer up to £3,000 in interest-free overdrafts. This means that nothing has to be paid back while the account is a student account and no interest will be charged until after graduation.
If the overdraft limit is exceeded then additional charges will apply, the same as with any current account.
A student bank account overdraft is not free money and must be repaid eventually. Always be mindful of how much debt you are getting into, as after university it will begin charging interest.
Competition between banks and building societies for student accounts is high, and many offer freebies and incentives as well as interest-free overdrafts. These freebies commonly include things like free student railcards to save on train fare, free Tastecards to save on restaurants and cash bonuses just for opening an account.
Whilst these freebies are tempting, other aspects of the account should also be considered. It is important to shop around and compare the various student bank accounts that are available. When choosing a student bank account have a look at which services are on offer with each provider, and also try to choose a bank that has branches near to the university campus for ease and convenience.
The most important aspect to consider when choosing a student bank account is the overdraft facility. Interest-free overdrafts are unique to student accounts so students really should make the most of it while they can.
Understanding the different overdraft offering can be confusing, and one thing to look out for is whether the overdraft is ‘up to’ or ‘guaranteed’. Any banks that are advertising an ‘up to’ overdraft, often mean that this is the maximum they would offer. It usually won’t be available until the final year of university and only offered to those students with a good credit rating.
A guaranteed overdraft will be available to all students. It is also vital that the repayment terms are considered, most banks will automatically transfer a student account to a graduate account after university. After this, they generally give a year or two of the interest-free overdraft, and then interest charges will start being made.
Opening a student bank account is a form of borrowing money, which means banks will run a credit check when you apply. Your credit score will often determine how much overdraft you will be offered.
After deciding which student account is best, the next step is to apply for the account. Most banks allow young people to apply for a student account from either age 17 or 18, but each provider will have their own age limits. In order to open the account, the student will need to show:
This documentation can be taken into any bank or building society branch in order to set up the student account.
Some banks also accept a copy of A-Level results along with a conditional offer from a university as proof of student status but be sure to check with your chosen bank before you try to apply.
Some students might consider just keeping their existing current account as opposed to opening a new student account. There are many benefits of choosing a student bank account, and they can be opened alongside existing current accounts.
The main advantage of opening a student account is the interest-free overdraft, which can come in handy during the time at university. Even for students who feel they will not need to borrow money to get through university life, it can be a good idea to have as a backup and give a bit of financial breathing space.
As well as the interest-free overdraft, the additional freebies and discounts are often very useful for students. Being able to save money on rail fares and dining out can add up to some huge savings over three years at university, and none of these perks will cost anything as student bank accounts are free to open. Some student bank accounts also come with student credit cards, which can be another added benefit that isn’t available with a normal current account.
It is often worth opening a student bank account before you begin university. This means you can get your student loan paid directly into your student account without the hassle of switching it over later.
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