Why open a student bank account?
Advice for UK students on how a student bank account works.
What’s the best student bank account?
That’s the million pound question and there is no short answer, other than it depends what you’re looking for.
There are lots of things to consider when it comes to managing your money and if the thought of opening a student bank account or moving to another bank is a source of anxiety, the best thing you can do is educate yourself on the topic and options available. As with most things in life, you’ll start to put things together one piece at a time but there is no substitute for doing the research. Below you’ll find some helpful advice to get you started.
What’s a student bank account?
Student bank accounts are similar to regular bank accounts but come with additional benefits and are exclusive to students in full-time higher education.
The benefits of a student bank account vary, but some of the things that providers offer to entice students include:
- an interest-free arranged overdraft
- tools to help you keep track of your spending
- discounts on everything from eating out to watching a film at the cinema.
Things you need to open a student bank account
As a general rule, UK students will be asked to provide:
- One or more forms of identification – this could be your driving license or passport
- Proof of address – for example, a recent water or electricity bill
- Proof that you’re a higher education student – the bank may ask for your UCAS offer letter.
What’s an overdraft?
An arranged overdraft allows you to lend money through your current account but you’ll only enter your overdraft when you spend more than your available balance, either by making a purchase or cash withdrawal.
Do student bank accounts affect your credit score?
In a nutshell, yes. An overdraft is a loan in everything but name so the lender will check your credit rating before you’re accepted. This could also impact how much the bank is prepared to allow you to borrow.
Check your credit score using one of the free online tools before you apply for an overdraft so you know what to expect.
Also, it’s important to take care of your credit rating as any mistakes could have a huge impact on what you can and can’t do in the future in relation to borrowing money.
What does interest-free mean?
Usually, when you lend money, you pay for the privilege.
The benefit of an interest-free arranged overdraft is that you only pay back the money you borrow. Be careful though, terms and conditions will apply, and the 0% interest period won’t last forever.
Check the fine print
An overdraft can be really helpful if you’re studying full-time and unable to work or do as many hours as you would like for your employer. However, there will come a time when the lender will want their money back so don’t treat an interest-free arranged overdraft as gifted money.
Ensure you understand exactly what you’re signing up for and have a plan to pay back any money that you borrow. This will help to avoid any unpleasant surprises.