The best bank accounts for students

With banks battling for new student customers, choosing the best student account can be tricky. I've dedicated this post to students, because i know how hard it can be coping with finances. Here I will  reveal what you should look for when signing up for a student bank account and also what popular providers are offering.It can be quite complicated when choosing the right bank, so please read and decide for yourself what you should go for.
    
If you’re one of the lucky ones who got a place at a University this year, then you’re bound to be over the moon.
Most of us know someone who’s venturing off to University in a quest to learn both an academic subject and partying skills but before anyone leaves for Uni, they should definitely take time to plan their personal finances.
After all, those text books don’t come cheap and, believe me, neither do drunken nights out!
So, if you’re off to Uni in September, the first thing you should do is open a student bank account and I’m going to take you through what you should look for when signing up for one.

 

Interest free overdrafts

Personally, my student account overdraft was a financial lifeline whilst I was at University. The great thing is, most of them are interest free for the duration of your academic course, as long as you stay within the limits set by your provider.
The use of your overdraft can help you put down a deposit on your student accommodation or help you through the crucial weeks before your student loan comes in.
Of course, you shouldn’t look at your overdraft as ‘free money’ because sooner or later you’ll have to pay it back, so it’s a good idea to spend only what you need to.
Before you get out a student bank account, have a good look at the interest free overdraft limit. Some banks, like Santander, offer you a set rate that increases every year, so you gradually get more leeway.Others, like Barclays, only increase your overdraft limit if you apply for each limit increase successfully and this depends on how good your credit rating is.
Check out the terms and conditions before you sign up, as some providers expect you to deposit a minimum monthly instalment into your current account and if you don’t do this, you could be charged for your overdraft.
Generally, if you think you’ll need financial helping hand at Uni, my advice is to opt for the biggest guaranteed interest free overdraft, which is currently The co-operative bank’s student account at £2,000 (see table below).
As long as you’re responsible with your spending, you’ll have money to help you through your time at Uni and you’ll also enjoy an interest-free period throughout your time as a student.
But beware, overdrafts can be dangerous if you’re irresponsible with them.
If you go over your overdraft limit without notifying your bank beforehand, you’ll be charged with an unauthorised overdraft charge, which is usually around 20% APR  - but more on that later.

 

Breaking the limit

If you really need to extend your set overdraft limit, some providers will allow you to do this if you ask them directly.
They will charge an authorised overdraft interest rate however, which varies depending on which provider you’re with.
It’s best to avoid getting to this stage, as this is how you can rake up big debts. If you don't pay off these debts, it will affect your credit rating, so you’ll find it harder to get credit when you leave University.
However, the most expensive danger to avoid is if you exceed your overdraft limit without telling your bank.
If you do this, you will be in the dangerous territory of unauthorised overdrafts.
This means you will be hit with hefty charges which vary from around £15 per transaction to a jaw dropping £30 per transaction.
So, you should avoid an unauthorised overdraft at all costs, as this could lead you down the slippery spiral of a financial disaster.

 

The run down

So now you know the ins and outs about student overdrafts, let’s take a look at what the most popular student accounts are offering.

Provider	Account	Interest free overdraft	Authorised overdraft interest rate (EAR)	Other incentives
Santander	Student current account	1st year £1000 2nd year £1250 3rd year £1500	9.9%	Mobile, gadget and laptop insurance worth £243.72 each year
Lloyds TSB	Student account	First 6 months £500 7-9 months £1000 12 months+ £1500	8.2%	Free three year NUS extra card (normally costs £11 per year) Three year Three year YHA membership, 40 free downloads from eMusic and free LAVA mini speakers
Halifax	Student current account	Immediately- £500, then apply for more when you wish to increase your limit (maximum is £3000)	7.2%	Commission free foreign currency and traveller’s cheques, 25% discount on AA break down cover, 20% discount on Card Care card protection insurance
Barclays	Student additions account	Immediately- £200 then up to £2000, depending on each application	8.9%	Access to deals at Phones 4u (Until Dec 2010)
HSBC	Student bank account	1st year £1000 2nd year £1250 3rd year £1500	3.6%* * 3% over their base rate	Two years free Worldwide travel insurance, including winter sports, Free TalkMobile SIM card with £5 preloaded credit.
NatWest	Student current account	1st year £1000 2nd year £1250 3rd year £1500	n/a	Free three year 16-25 railcard (normally costing £130) student discount card, £100 saving on ASUS laptops
The co-operative bank	Standard student account	1st year £1400 2nd year £1700 3rd year £2000	9.9%	£100 cheque guarantee card

As I mentioned earlier, The co-operative bank’s Standard student account offers highest guaranteed overdraft, although Halifax potentially could offer you more depending on your circumstances.
HSBC offer a really low authorised overdraft rate at 3.6% and Santander implement a steady yearly increase in their overdraft limits, which could help with your budgeting.
Most providers lure in potential customers with the allure of freebies, but are these just a distraction?

Freebies and offers

One of the most important things to remember when looking for a student account, is to not be drawn in by freebies.
These may look good at a glance, but you should first consider your overdraft limit before you get mesmerised by the potential additional goodies.
Saying that, some providers offer some decent incentives that could really help your finances at Uni.
The best of the bunch is NatWest’s five year 16-25 railcard, which you get when you sign up for their student current account.This is really useful, as it saves you 1/3 off rail travel and is worth £130.
So the bottom line is, there’s no secret answer to choosing the best student bank account because it completely depends on your individual financial needs.
However, keeping in your overdraft limit and reading the full terms and conditions of your account before signing up, could mean the difference between a financially smooth first year at Uni or a dangerous plunge into the depths of financial uncertainty.
After all, one bad financial decision now could have negative repercussions on your money for the rest of your life.