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 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 from there just because it’s there.
The length’s 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.
It looks like this year there won’t be any cash freebies – in 2019 HSBC gave a free £100 cash bonus, but at the moment that offer isn’t running.
Budgeting & free spending abroad
New digital banks Starling or Monzo are both great banks to help you budget. They have a number of features which will help you keep track of your spending, and I’d use one of these as my day-to-day bank, transferring over a set amount each week to spend from the student account with an overdraft.
However, these aren’t student accounts so 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 overseas cash machine limit of £200, so 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 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
Guaranteed 0% £1k overdraft in yr one, £2k yr two, £3k yr three
This account gives the biggest guaranteed overdraft over the course of the degree. It’s a safety net, or if you don’t use it, cash to put towards savings.
Nationwide has a guaranteed £1,000 overdraft in the first year, going up by £1k in the second year, and again in the third. You’ll 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.
Budgeting and tracking features
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. Plus it’ll save you money when you spend overseas.
However do not go overdrawn on this account as it will be expensive – there is no 0% overdraft.
Other accounts for students:
It’s worth checking out these accounts too, which mainly offer freebies. Remember you can only have one “student” account, so you’d have to pick one of these over the Nationwide account above.
Santander 123 Student
£1.5k overdraft in year one, Free 4-year railcard & 1% interest
This would be my top pick as alternative to the Nationwide account as you’ll get the freebie, interest and guaranteed overdraft.
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.
The account also has 1% interest on balances up to £2,000 – worth up to £20 a year.
You also have to pay in £500 every term.
Guaranteed £1k in year 1, up to £3k by year three
HSBC will guarantee the same level in the first year, but further £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.
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 £3,000 by the third year.
One year Amazon Prime or free Tastecard
The interest-free overdraft is up to £500 in the first term and then up to £2,000 in the second. 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 a year of Amazon Student, which sounds good until you realise you can get six months of Prime free as a student anyway, and then pay just £39 a year. So really this freebie is worth £20.
The alternatives include a free Tastecard (worth around £35) or a National Express coachcard.
Free 3-year Totum card
With Lloyds you can get a free three-year TOTUM card. if you open an account before 31st 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 TSB Student account offers 5% interest on £500, which is worth £25 in the first year.
The overdraft is £500 for the first six months, and then up to £1,000 for the next three, and then u pto £1,500.
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.