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Student bank accounts

Last updated: 09/08/2023 14:16

The interest-free overdrafts offered by student bank accounts can help bridge the gap between student funding payments.

Student bank accounts are not mandatory, but they do offer advantages.

Opening a bank account in the UK is different for international students visit our guidance on opening a bank account as an international student.

Advantages of a student account

The main advantage of student bank accounts is that they may offer interest-free overdrafts. This means you can borrow money (to a pre-agreed limit) without paying interest. Generally, this is only if your student finance is paid into that account. This means that you can only have one student bank account.

Although the best idea is not to borrow anything, an interest-free overdraft can help you manage your cash flow and avoid resorting to credit cards or other loans.

Banks often offer incentives to open a student bank account with them, such as shopping vouchers or discount cards. However, make sure you open the best account for yourself, not just the one with the best incentive. More information on the different accounts available can be found on Save the Student or Money Saving Expert.

Different banks offer different terms and conditions, so read the fine print and choose an account based on your needs, whether the largest overdraft or a railcard, to make travelling home cheaper.

Student bank accounts can provide a useful safety net when walking the financial tightrope of student living, as long as you use them responsibly. Remember that an overdraft is a limit, not a target. It should be viewed as a source of money to help you manage your cash flow between funding payments, so careful budgeting is still essential.

More information and help with budgeting.

What to watch out for

Exceeding your arranged overdraft limit can result in charges and affect your credit score. To use your student account responsibly, make sure you know your overdraft limit and check your bank account regularly to avoid going over and incurring charges.

Remember that the money you borrow has to be paid back eventually. To escape any interest charges, make sure you know the terms and conditions of your account, including what happens once you’ve left university.

When you enter a branch to set up an account, a staff member should be able to tell you all the details. Some banks will convert your student account to a graduate account at the end of your degree. Often, these also have an interest-free overdraft for a set period, giving you enough time to repay the money you borrowed using the overdraft facility.

Further advice

If you are struggling financially or have questions about student bank accounts or how to handle your finances at university, you can contact the Student Advice and Money team.

Student Advice and Money