If you have just been accepted into university there is a lot to organise before your move in day. You need to buy all your flat essentials, pack, and fill out the countless paperwork. It is also important to set up your student bank account before you move. This way you can ensure that your student loan and rent payments are all coming from the right account.
There are lots of different student accounts to choose from and picking the right one can be confusing. It is important to look at all the different factors before signing up for an account.
Overdraft
Student bank accounts are unique as their overdrafts are interest free until after you graduate. Different student accounts have different overdraft limits and conditions. Some banks may allow you a set overdraft for your whole time at university, while others may allow you to increase your limit each year. With most banks, overdraft limits are between £1000-£3000.
It is important to consider how much overdraft you will need (if you need one at all). For example, if you get a large student loan or significant support from your parents, you may not need to rely on an overdraft while at university. In this case, pick an account with a smaller overdraft limit so that you will not be tempted to use a large amount of overdraft that you do not need.
Alternatively, if you know that you may have to rely on an overdraft throughout university, choose a larger limit so that you will not use the maximum amount and be left in financial difficulty.
Incentives
Most banks offer an incentive for choosing their student account. The incentives definitely should not be the main factor when selecting a student bank account, but some may be able to save you a lot of money throughout university. Incentives range from cash, to railcards, to other vouchers such as dining cards.
While £100 in cash may look tempting, in reality it won’t even last you through freshers week. An incentive such as a railcard, however, would save you a lot of money during your time at university, especially if you commute or visit home a lot. Don’t let incentives be your deciding factor when choosing a bank, but definitely consider them.
Graduate Account
Once you graduate, your student bank account automatically becomes a graduate account. This is when you may begin to be charged interest on your overdraft. Different bank accounts do this differently, so it is worth taking a look at how each one works. Some banks give you an extra year or two of no interest overdraft to allow you time to pay it back. Others will charge interest immediately, but do this gradually. For example, for the first year they may charge interest on half of your debt, while the other half remains interest free for an additional year.
The best student accounts will keep your overdraft interest free for extra time after you graduate. This gives you time to use your graduate salary to pay back your overdraft and hopefully avoid paying interest all together.
Save the Student create a great yearly comparison of all the student bank accounts on offer. Here you can see the overdraft limits and incentives for each account.