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Student banking: what do you need to know?

It may not be the most exciting aspect of starting university, but choosing the right student bank account can help you make the most of your money.

From linked overdrafts to credit cards, here’s what to look out for.

Bank accounts

You might want to look for a bank account that’s been created specifically for students, as they tend to offer incentives like:

  • vouchers
  • railcards
  • cash back
  • cash rewards for opening the account

Incentives for opening an account opening may sway your initial thinking, but it pays to check what else you’ll get with the account to help you manage your money throughout your studies.

For example, an interest-free arranged overdraft could give you an additional buffer, while a current (or savings) account that pays interest could add a little extra to any money you’re earning.

Another thing to consider is the tools and features that come with an account for:

  • making payments
  • using ATMs (including any associated charges at home and/or outside the UK)
  • keeping track of what you’ve spent and how much you’ve got left

Overdrafts

An arranged overdraft is a way of borrowing money through your current account. Banks will often charge a fee for this, as well as interest on what you’ve borrowed.

However, student bank accounts often provide overdrafts that don’t charge interest or fees, as long as you stay within your agreed overdraft limit. Limits for student overdrafts may change depending on what year you’re in.

Keep in mind, student overdrafts may be interest-free while you’re a student, but you’ll need to pay back the money back and may be charged interest once you’ve graduated.

Some graduate accounts may allow you to continue with an interest-free overdraft amount for a set time.

Credit cards

Having a credit card can enable you to spread costs – essentially buying something today and paying it off at a later date or in instalments. Used wisely, a credit card can help you build a healthy credit score and give you payment protection you get when you spend between £100 and £30,000 under Section 75 of the Consumer Credit Act.

You’ll have a credit limit – a set amount you’re allowed to spend on the card – and you’ll get a statement every month with a list of your transactions. If you repay the full amount within that agreed timeframe, you won’t have to pay interest.

However, if you’re unable to repay the full amount you’ll be charged interest and this can quickly add up. Before taking out a credit card, it’s important to check what the interest rate is as this will impact how much you need to repay. You could also be charged a fee if you go over your credit limit, use your card abroad or make a late payment.

So, while credit cards can be a useful way to spread cost, cover emergencies and improve your credit rating if used in the right way, they’re not necessarily for everyone.

Finally, how accessible do you want your bank to be? Do you value the option to talk face to face, on the phone or via chat, for example, as well as doing your day-to-day banking online? Or are you happy with a purely digital relationship?

HSBC Student Bank Account, for students. Terms and conditions apply.

 

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