What Makes a Good Student Bank Account?

October 5, 2007 By

University is an expensive business, particularly at the beginning of terms huge chunks of money are laid out on accommodation, course books, and the ever present socialising before lessons begin in earnest. Even with a job it’s almost impossible for the fully self-supporting student to avoid dipping into the red at some point. To that end the most important – and therefore most common – attribute of a student bank account is the interest free overdraft. To all intents and purposes it is ‘free’ money for a limited period, a usually substantial amount that can be used without penalty, and then hopefully paid back during the course of the holidays or after you graduate.

With so many different types of student account offering this most essential of items, then, what other aspects impact upon the student’s choice of account?

Returning to the overdraft theme the matter of just how large the interest free overdraft is has an impact. Quite simply, the deeper the interest free overdraft, the larger the margin of error – or alternatively the greater opportunity for the excessive spending which is one of the hallmarks of University life. Walk around any University campus in the morning and you will hear students comparing how much they spent on the previous night out, teetering on the brink of financial ruin is part and parcel of the student experience. For one of the largest overdrafts for student current accounts, and a £100 sign up bonus, take a look at RBS.

Interest rates, it must be said, have little impact on the choice of a student account. Nearly universally the interest rate of student account’s is negligible, and most people accept that even if they manage to stay in the black they are not going to have very much money in their account and to that end don’t pay particular attention to the interest rate. Students who do not require their entire loan in order to survive from one term to the next tend to take the excess money out of their student account and put it in a saving’s account where more interest will accrue. It should be noted, however, that if you are in the market for a current account with a decent AER the young people’s current accounts offered by Alliance and Leicester (10%) and Abbey (6%) lead the field by some considerable margin.

After the interest free nature and the limit of the overdraft, then, the main impact on student’s choice of account is the extra bits and pieces that come with it. In recent years different banks have offered CDs, MP3s, MP3 players, free driving lessons, youth hostel membership, mobile phone insurance and even NUS extra cards – to name but a few. A quick poll of students will reveal, however, that the most successful current extra offered with a student account has been NatWest’s free Young Person’s Railcards. These cost £20 a year to buy normally, but NatWest offers one that lasts for five years. If you travel by rail frequently, then this could be one of the top student current accounts for you, as the saving is potentially limitless.

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