Student intern Victoria breaks down the basics of student bank accounts and choosing the best one for you…
Overt overdrafts, fabulous freebies, daunting fees and interest-frees – but do you need a student account? How do you choose the right one for you? Whether you’re a fresher or a current Cardiff University student, you can use this blog to help choose or swap to the best bank account for your needs.
The Student Account
The main perk of student bank accounts is that they offer interest-free overdrafts, which means that you can borrow money (within a pre-agreed limit) without paying interest on it. This is generally provided you pay your student loans into that account. They also sometimes offer actual perks, like free amazon vouchers, but you shouldn’t allow your eyes to light up at the prospect of freebies and go running for the best one.
Do I need a student account?
A student bank account is one of the greatest of all student offerings in real terms (alongside not paying council tax), but no you don’t necessarily need one. I didn’t have a student account during university because Nationwide didn’t offer them at the time, but I wish I had set one up. I think most students would join me in lamenting the loss of a freebie. Plus, it meant that living in that dreaded period between student loan payments was a pitiful front crawl through the barren desert of my finances, whilst my friends could live more easily with the help of their student overdrafts.
Advantages and Disadvantages
A student account can be a real student saviour, allowing you to have money even when your loan runs out. They can be especially useful for students who get the minimum loan, and need that little bit extra to see them through from term to term.
Student bank accounts can provide a useful harness when walking the financial tightrope of student living, as long as you use them responsibly. You should only borrow up to your pre-agreed limit. If you borrow more than this, then you will be charged unarranged overdraft charges which can be as much as £10 per day. This will also negatively affect your credit score. Checking your bank account regularly is essential for avoiding charges, but this can be done easily with internet and mobile banking.
In the wise words of Paula from the Advice & Money team, ‘an overdraft is a limit, not a target.’ Remember that the money you borrow has to be paid back either when you finish university, or a year afterwards (depending on the terms and conditions of your student account) if you want to escape interest charges. Most banks offer graduate accounts once your student account closes, and these usually still have interest-free overdrafts to give you enough time to pay the money back that you’ve borrowed. Make sure to ask about this when you open an account.
Three tips to master the student account
- Check your bank account regularly
- Don’t go over your pre-agreed overdraft limit
- Treat your overdraft as a limit, not a target
Choosing the right account for you
You should choose a bank account based on your own needs, whether it’s the biggest guaranteed overdraft or a railcard to save money on travelling home. Don’t just go for the account with the best freebie, although if it’s something you’ll use and the account is what you need then all the better! Discuss the terms and conditions in detail with someone in your bank of choice.
Make sure you ask:
- How much money you need to put into the account each term?
- What your overdraft limit is?
- How long your overdraft will remain interest-free for. (Do you they offer interest-free overdrafts on their graduate accounts?)
- The terms and conditions of the freebie?
The Banking Breakdown
Find out the best of what banks are offering this year with the help of: Money Saving Expert guide to student bank accounts 2016/2017
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Victoria, Student Intern
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