Freshers week is fast approaching, and this year’s crop of first-years will be soon gearing up to start their university journey.
The first, and most important, financial decision students take, is choosing the bank account that will take them through their studies, and beyond.
Banks are falling over themselves to sign students up, handing out tempting freebies to snare them including Amazon vouchers, free railcards and interest-free overdraft buffers.
With a whole host to choose from – we take a look at the good, the bad and what your priorities should be.
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If there is one piece of advice to help guide your teenager as they pick out their bank account, it’s that tempting freebies shouldn’t be their main motivation.
Don’t get us wrong, a free railcard or Amazon Prime membership can be a real money saver. But most can be bought fairly cheaply anyway.
However, there are some eye-watering fees for emergency borrowing with some accounts that might outweigh any savings.
A free railcard for three years would cost students £70 to buy themselves – but emergency borrowing fees of £5 per day – charged by Santander – would soon wipe out the savings.
No matter how good at budgeting they are, it is likely that students will spend some time in their overdraft, waiting for the next student loan installment to hit the bank, or the next payment from the bank of Mum and Dad.
In fact research from comparison site Moneysupermarket says a whopping 42 per cent regularly slip into the red by an average £548.
So, a generous fee-free buffer should be the top priority.
Are cashback schemes lucrative?
Most of the banks now offer cashback deals boasting cashback of ‘up to 15 per cent’ including the likes of HSBC, Nationwide and Natwest.
These cashback rates however are limited to certain retailers.
These schemes are certainly an added bonus, but earnings will likely never amount to much, and certainly not enough to influence your decisions.
This is why we have listed the accounts with the most generous overdraft offering at the top.
But remember, the overdraft limits advertised are not guaranteed, you may be offered less, but with little opportunity to have built up a bad credit rating or any debt issues, most students should reach at least close to the deals offered.
Remember some banks will charge extra fees for going over these limits.
Top tip: While most millennials rely on online or mobile banking these days, it could be worth a bit of research on the campus and surrounding area to find out which banks have branches nearby.
Nationwide – Top overdraft and no fees on cash withdrawals abroad
Nationwide’s FlexStudent current account offers the best overdraft on the market.
It also received a customer satisfaction rating from consumer group Which? of 71 per cent – the second highest score.
As with most accounts these days, the limit offered goes up as studies progress.
For year one it’s £1,000, year two its £2,000 and from year three you get up to £3,000. You don’t have to take the full limit.
The account is also designed to not go into an unauthorised overdraft, but if they do, there are no extra fees.
Nationwide will also waive overseas fees. This is a big bonus for students travelling in their university holidays or planning a year abroad saving around 2-3 per cent in fees each time they swipe their card abroad or withdraw cash an an ATM.
The account also comes with one per cent interest on the first £1,000 held in students’ accounts, but for most this won’t be a major draw.
To open the account you need to be within two months of your course start date online or you’ll need to apply in branch or over the phone. It also requires a £500 minimum term deposit.
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HSBC – up to £3,000 plus £80 Amazon voucher and Prime for a year
HSBC’s Student Bank Account has a decent overdraft in addition to its tempting freebies.
The bank has ditched its previous in credit interest deal offering 1.5 per cent on the first £1,000 for the first year, instead adding an attached regular saver paying 3 per cent on up to £3,000.
There are no fees for going beyond your limit.
It has also upped the value of the Amazon giftcard to £80, plus you still get a year’s free membership to Amazon Prime Student if you open an account before December 31.
The free Prime membership includes one-day delivery, Prime Video, Prime Music, and exclusive discounts. Any student can sign up currently for a free six-month trial – after that it costs £39 per year.
It’s worth noting, the bank has a Connected Money app, which allows users to see the details and balances on all of their accounts with other banks. It also comes with extra spending analysis and budgeting tools.
Barclays – Up to £3,000 with an instant £500
Barclays Student Additions also offers a fee-free overdraft of up to £3,000, plus it gives students £500 as soon as they open the account.
Again the overdraft is tiered: you get up to £1,000 in year one, £2,000 in year two and £3,000 after that.
There are extra fees however if you need to borrow in an emergency so watch out. You will pay £5 per day to borrow up to £100 in an emergency (up to £35 per month) plus £8 per unpaid item (up to £32 per month).
Its Blue Rewards scheme is also open to students. They are unlikely to make the most of the feature – which costs £3 per month – and offers money back for holding other Barclays products.
They will be most likely to earn the base £7 per month reward for making at least two direct debits a month though, netting them an extra £4 per month after fees. However to earn this you do also have to deposit at least £800 into the account each month.
You can also add insurance packs to the account for tech and travel if you want for £9.50 and £10.50 per month respectively.
To open an account you need to be over 18, plan to use it as your main bank account, and be studying full time for two years as an undergraduate or one year at post-graduate level.
Santander – Four-year 16-25 National Railcard
Santander’s 123 Student Current Account currently offers the four-year free 16-25 National Railcard.
Santander also received the highest score for customer satisfaction from students in the Which? ratings at 75 per cent.
This is likely a perk parents will be most drawn to, helping to ensure their kids visit more regularly – but it is also arguably the best value freebie on the market.
It gives you to a third off the price of your ticket – particularly useful for anyone living far away from home.
The actual cash value of the card isn’t enormous – you can pick one up yourself for £100 for four years ( they cost £30 a year or £70 for three years).
But one of these is an essential for students and a real money-saver. The National Rail website estimates it could save £192 per year on train tickets – over three years of study that’s worth £576.
The overdraft, however, is less generous but you do get a £250 arranged overdraft as soon as they check you are eligible.
You get up to £1,500 in the first three years of study, £1,800 in your fourth year and up to £2,000 in your fifth year.
Most students are likely to need a larger overdraft buffer than in-credit interest, but students with a positive balance sitting in the account can earn up to 3 per cent on £2,000.
Watch out: Unauthorised borrowing costs £5 per day. If it has to make a transaction beyond your authorised limit it costs £5, and bounced payments cost £10. Charges are capped at £50 per month.
It pays 1 per cent on anything between £100 – £200, 2 per cent between £200 -£300 and 3 per cent on £300-£3,000.
You must pay in at least £500 per term to the account.
Natwest – Free National Express Young Persons Coachcard.
Natwest gives freshers a choice of lower-value freebies but it’s overdraft isn’t the largest.
You can get a free Tastecard or National Express Young Persons Coachcard for four years, or a free Amazon Prime membership for one year.
The coach card gives you a third of travel and would cost you £30 for three years, or £12.50 per year to buy yourself.
The Prime membership costs £39 per year as a student, with the first six month free for students.
The Tastecard offers two-for-one or 50 per cent deals when eating out for £34.99 per year.
It doesn’t offer much of a tiered overdraft. It gives £500 in the first term, and increases the maximum then to £2,000.
Any payments that cannot be made because they take you into an unarranged overdraft cost £8 (once per month), but there is no interest or unarranged borrowing fees.
The mobile app however is one of the best and recently scooped up an award for top banking app at the British Banking Award.
A handy feature that might appeal to students is that it allows you to take out up to £130 from a cash point (per 24 hours) using your mobile phone in case of an emergency. It also lets you pay your phone contacts up to £250.
To qualify Natwest requires that you use the account as your main current account and deposit at least £750 every six months and making at least three debit transactions every month.
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Lloyds Bank – Free NUS Extra card
Lloyds Bank’s Student Account offers one of the smallest overdrafts, again staggering the limit to help avoid building up a debt mountain in the first term.
The fee-free overdraft gives you up to £500 immediately when your application is successful and for the first six months.
The limit increases to £1,000 in months seven to nine, then £1,500 for year three and £2,000 for those studying for four to six years.
If you stray beyond your limit by more than £7, you will pay a fee to borrow however of 1p per £7 borrowed.
Those who open an account before 31 October get a free NUS Extra card.
This offers extra discounts, above a standard NUS student card. There are 200 retailers signed up.
Here are a few examples of what you will get: 10 per cent off at Co-op, ASOS and Apple, 20 per cent off at National Express and 25 per cent off Odeon student tickets.
Buying one of these yourself costs £32 for three years, or £12 for one.
You can apply if you are you’re over 17 and studying full-time and you have been a UK resident for at least three years. The account is open to anyone with a confirmed place on a course, or who is already studying.