The best 0% overdrafts and freebies for students.
I write a lot on the blog about the best bank accounts, but picking a student bank account is very different.
I chose my bank at uni, many years ago, because it was one of two or three on campus. In the late 90s it was really useful to have easy access to your bank so the location was important.
It’s very different today. For a start you can manage everything online so locality hardly makes a difference. Instead, current students should choose an account that’s going to be worth the most you.
That generally means choosing one with benefits – namely interest-free arranged overdrafts and free things like Young Person Railcards. But they’re not the only considerations.
It’s also worth noting that most accounts are designed for three-year courses, so check the terms, especially for the overdrafts, if you have a longer degree.
Here are the factors and top accounts right now that you should take a look at.
Rather watch than read? Here’s my video on the best student accounts:
What to look for in a student bank account
A 0% overdraft could be essential to help you get through your time at university. The money in there won’t have any interest added on top, making them the cheapest way to borrow money.
Of course, you need to be careful about using it and not treat it as free cash as you will have to pay it back. You will generally have a few years after you graduate (and hopefully start working) to do this, but even so don’t spend this money just because it’s available.
The lengths of 0% overdrafts change between the banks – and you might not even get the advertised amount. If the wording says the overdraft is “up to” that means you might not get the high sum mentioned in the adverts.
But it’s might be best to not go for that large amount anyway as the bigger the overdraft the bigger the temptation to use it all. Instead, work out how much you think you’ll need to use and ask for that.
Plus, even if you think you won’t need one at all, it’s worth choosing a bank that offers one and applying for it at the start – you never know how things could change.
Some banks will also increase the size of overdraft each year (if you ask), which means you can’t blow it all in the first year.
However, there could be conditions attached to having one of these fee-free overdrafts, so make sure you read all the Ts&Cs upfront. It could be something like pay in £500 every term (Santander).
There’s also the chance you could get rejected for the overdraft so check your credit file before applying. Most students won’t have much on their file, but it’s worth making sure there’s nothing wrong on there.
And of course, if you spend more than your overdraft allows you’ll be hit by huge interest charges of around 40%.
When I was starting uni, all the banks had some kind of freebie in an attempt to draw you to them over another bank. I think I got a free Railcard.
Some of these save you a fair bit of cash – but they should generally be a second deciding factor once you’ve looked at overdraft options.
It also pays to check how much these freebies would cost if you looked around for extra deals and discounts. Often the value advertised is much higher than you’d actually need to pay.
A few banks are offering cash for opening an account once again this year.
Budgeting & free spending abroad
I suggest using one of these as your day-to-day bank, transferring over a set amount to spend each week from the student account with an overdraft.
However, these aren’t student accounts and you don’t get a 0% overdraft with either card – so don’t overspend!
With both you also get fee-free spending abroad making them cheap ways to spend if you are studying overseas for a term – or just for holidays and travelling in the Easter and summer breaks.
Monzo comes with monthly cash machine limit of £250 if you don’t pay in at least £500 a month and have one or more Direct Debits. If that’s a problem you might be better going with Starling which has no limits.
Interest on savings
Though some of the student accounts will offer interest on money in the account, they are quite limited and not a reason to pick one account over getting an overdraft.
However, if you think you’ll have more money available or don’t think you’ll need to use all of your overdraft, then you could look at other current accounts and savings accounts offering up to 2.02%.
Be careful moving money from your overdraft to higher-paying accounts. You’ll need to make sure you’re not locked in, and be able to move money back to your main account if you need it.
The best bank accounts for students
Here’s my pick of the best accounts to get. You can only have one student account, but you can open up additional standard bank accounts on top. However since you’ll be subject to a credit check, don’t apply for these too close to each other
Largest guaranteed overdraft and top ethical choice
This account from Nationwide offers large overdrafts over the course of the degree, building year on year which will stop you blowing it all in one go.
You’ll be able to ask for up to £1,000 overdraft in the first year, going up by £1k in the second year, and again in the third.
There’s a minimum £500 that needs to be paid into the account every term and you must stay within your overdraft limit to keep it interest free.
You’ll also keep the £3,000 overdraft at 0% for the first year after graduation, and it drops to £2,500 for the next year, then £1,750 and then £1,000 – but watch out for costs from then on.
There are no freebies from Nationwide, but it’s probably the top student account if you’re worried about the ethics of your bank.
Budgeting and tracking features
If you’re happy to have a second account to use for your everyday spending you can’t do much better than Monzo. It’s packed with budgeting and tracking features to help you stay on track.
However do not go overdrawn on this account as it will be expensive – there is no 0% overdraft.
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Other accounts for students
It’s worth checking out these accounts too, which mainly offer freebies. These might seem more attractive than 0% overdrafts, but if you do need to borrow the latter is probably worth more.
If you’re really not bothered by an overdraft then it’s still worth nabbing one and putting that cash in savings.
Remember you can only have one “student” account, so you can’t have both the Nationwide and one of these.
Potentially you could open one of these accounts to get the freebie, then close it down and open up the Nationwide – as long as you do this earlier than two months after your course starts.
Santander 123 Student
Free 4-year railcard
The Santander 123 Student account overdraft for the first three years is a guaranteed £1,500. If you study longer it increases to £1,800 in year four and £2,000 if there’s a fifth year.
You also get freebies. If you are likely to be travelling by rail a lot then offers a free four-year 18-25 Railcard, which will knock a third of train fairs. The railcard itself is worth around £100 (a three-year card costs £70 and one-year one is £30).
However it’s worth considering that you can use Tesco Clubcard points to get one for a third of the price. So if you earn £10 in points you can get the one-year railcard, and for £30 in points you can buy a three-year pass. If the big supermarket near your halls is a Tesco you’ll easily earn enough points to buy one this way.
You also have to pay in £500 every term.
£80 cash plus a £20 Uber Eats voucher
HSBC’s student account has an up to £1,000 overdraft in the first year, but further up to £1,000 increases in the second and third year are subject to approval. Once you graduate you get £1,500 interest-free for the first year, and then £1,000 for the second.
The freebie is probably the strongest as you can use the bulk of the money as you wish, then choose either a £20 Uber Eats voucher or a year of Asos Premier. To get these you need to make five debit card transactions in the first month of opening your account.
This account requires you to pay in £500 each term.
Barclays Student Additions
Free Perlego account
This freebie is an annual subscription to a service called the “Spotify of text books”. You get access to 400,000 text books online, and a year is worth £96.
The 0% overdraft is up to £500 in your first term, increasing gradually so it’s up to £1,500 by the third year.
£50 cash and a 4-year Tastecard
The interest-free overdraft is up to £500 in the first term and then up to £2,000 after this. This might seem tight but it does help you adjust to budgeting and reduce the risk you spend it all in Fresher’s week.
Natwest and RBS both also offer £50 cash (ends 5 November 2021) and a free 4-year Tastecard (worth around £35 a year). If you don’t go for this account there are other ways to get cheap or free dining discount memberships.
Free 3-year Totum card
With Lloyds you can get a free three-year TOTUM card. if you open an account before 31 October. This is worth £32, though it’s worth checking to see if you can’t get those discounts anyway via the free basic TOTUM card or services like MyUniDays and StudentBeans.
The overdraft is up to £1,500 in the first three years of Uni. If you study for longer it’ll go up to £2,000 in years four to six.
The TSB Student account offers 5% interest on £500, which is worth £25 in the first year if you always have £500 in the account.
The overdraft is £500 for the first six months, and then up to £1,000 for the next three, and then up to £1,500.
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How to get a student bank account
You have to be over 18 and living in the UK to get any student bank account, and most will require you to be at the start of your first year to get the freebie.
You’ll need to show ID such as a passport, driving licence or birth certificate. You’ll also need to bring along proof of your acceptance to the uni or college – possibly your UCAS letter or university acceptance letter.
You don’t need to wait until you get to your university to open the account, so doing it now before you head off means you can get your bank card and PIN sent out and your online banking set up in advance.
Don’t stick with your bank forever
Banks go all out for your business as a student as they know there’s a good chance you’ll stick with them for the rest of your life – and that’ll make them money.
Don’t. Once you’ve taken advantage of your 0% overdrafts or freebies, look for the best account out there for you and switch. And maybe keep switching! You can see the types of offers currently on offer here.