5 days ago
The best bank accounts for new students
With results day fast approaching, some students may be getting ready to open their very first bank account. Although an exciting time, it may also be the first time many young people are having to focus on their finances.
This may seem daunting for some with an overwhelming amount of information, data and numbers now readily available. To offer some guidance and advice, student money expert at Save The Student, Tom Allingham shares his top tips about student bank accounts and the main do's and don'ts.
What are the best accounts for new students?
'It's difficult at this stage to say definitively what the best bank accounts are this year, as not every single bank has published their details yet,' Allingham says. 'However NatWest, RBS, Santander and Nationwide have all published their details for the coming year and all of them are very strong.
'NatWest and RBS are looking particularly strong because they are both offering interest-free overdrafts of up to £3,250. On top of that, they are giving away £85 cash and a four year tastecard.
'What I will say though is, no matter what the other offers are that come in, there might be some that end up offering more or offering less.'
Allingham also mentions the importance of looking out for a zero percent overdraft – this allows you to borrow up to a specified limit without paying interest on the amount used. 'For the vast majority of students, this will end up being way more important long term that any freebies that are being given away short term,' he explains.
How can students find the right account for them?
'All banks have their own websites with their own information on them,' Allingham says. 'We at Save The Student also have our own guide which breaks down every single bank's offer this year – including the overdraft and freebies they are offering.
'I would also advise to take some time to work out a budget first, and from there you can work out roughly how big an overdraft you may need. If you're in the privileged position of maybe not needing the biggest overdraft, there are multiple banks that may suit your needs and you can start to look at things like the freebies.'
What are misconceptions about student accounts?
'One misconception when it comes to student accounts is focusing on things like freebies,' Allingham says. 'We definitely recommend students getting things such as rail cards, however they do often go on sale throughout the year and you can usually get them then for much cheaper.
'For example, the bank might say we're giving you a four -year rail card that is worth £100, but in reality it goes on sale multiple times throughout the year for less.
'Another misconception is to choose a bank because the branch is near campus, on the campus or because their parents use it and recommended it. I'm not saying those things aren't important – there is some importance on them but again, it is the zero percent overdraft that you should be looking at.'
What are the main benefits of having an overdraft as a student?
'The big benefit with the student bank account is if you stay within your arranged overdraft amount, you won't be charged interest for using any extra amount on your account – this differs to regular overdrafts on a normal bank account,' Allingham says.
'The added benefit on top of that, is that with every student bank account, once you leave university, it becomes a graduate bank account and you will get at least a year to build your way out of it without having to pay any interest on it.
'Maintenance loans will also fall short when it comes to living costs for students at university, and whilst they may still have parental contributions or a part-time job, that's not to say at the end of the term when they are still a couple of weeks away from student loan payments coming in, that they might not need to dip into their interest-free overdraft a little bit just to make ends meet.'
How should you use your student account once it's set up?
'Firstly, to have your account open, you will need to have been accepted to university as your bank will likely ask for your acceptance letter,' Allingham says. 'However in terms of how to manage your money and use the account, I would say to get your student loan paid into the student one.
'When it comes to day-to-day money management, you're potentially better off opening a second bank account for that. Options for those accounts are the likes of Monzo where you can transfer over a set amount of money weekly or monthly and use that for your day-to-day spending.'
