Student and graduate bank accounts

Best interest-free 0% student bank account overdrafts

If you’re off to university soon, getting the best student bank account should be a priority.

Not only do you want a generous, 0% overdraft that lasts you the length of your course – you’ll also want to make sure you get a deal that gives you the best perks suited to you.

Will I get the maximum overdraft with my student bank account?

Not necessarily – most of these overdraft limits aren’t guaranteed. Banks will assess your eligibility on an individual basis, based on your credit score, so you may not get the maximum overdraft advertised amount.

Nationwide has confirmed to Which? that as long as you don’t have credit problems, and you stick to the account terms and conditions, you can get the maximum overdrafts for each year.

In other cases, interest-free overdrafts are extended in instalments:

  • TSB says its students will get at least £500 for the first six months, and can apply to increase it to £1,000 in months seven to nine, and up to £1,500 from month ten.
  • First year students with a Lloyds account also get £500 for the first six months from account opening, £1,000 from month seven and £1,500 from month ten.

A handful of banks also impose funding requirements to qualify for the full overdraft:

  • Nationwide FlexStudent – pay in at least £500 per term from the date the account is opened (this can include your student loan, money from family members or any other income but not internal transfers i.e. moving money from a Nationwide savings account;
  • Santander 123 Student – pay in at least £500 per term to remain eligible for both the free Railcard and the interest-free overdraft (as with Nationwide, this can’t include transfers from other Santander accounts in your name).

Further down, we examine this year’s student bank account freebies and explain what happens if you exceed your overdraft limit.

Student bank accounts with railcards and other freebies

Once again, the top student account freebie for 2021-22 is offered by Santander.

It’s sticking with a free four-year Santander Railcard, worth around £90 (four-year cards aren’t available for general purchase but three-year Railcards cost £70 and one-year Railcards cost £30).

Santander doesn’t offer the largest interest-free overdraft but it does guarantee that you’ll get the maximum overdraft of £1,500 in years 1-3 if your application is successful.

Be aware that you need to pay in at least £500 every term and register for online banking to be eligible for this offer (and the overdraft).

Student bank accounts paying interest

Most banks have stopped paying interest to students.

Santander no longer pays monthly interest on credit balances (last year it paid 1% AER on balances up to £2,000).

Previously, Nationwide paid 1% interest on balances up to £1,000 and first-year students with HSBC earned interest at 1.5% above base rate on balances up to £1,000, but both offers were scapped.

The only providers currently paying credit interest to students are Halifax and TSB.

Halifax pays 0.1% on any balance, TSB pays 5% interest on balances up to £500.

What happens if I exceed my overdraft limit?

With all of the accounts in our table, you won’t be charged interest or fees for using an overdraft, as long as you stay within your free limit.

If you need to borrow more money, contact your bank and formally arrange for the limit to be increased. Some banks may allow an extension to your free limit but most will charge you ‘arranged’ or ‘planned’ overdraft interest.

If you exceed your free overdraft limit without authorisation, it could negatively affect your credit score and some banks will charge you for bounced payments.

Nationwide doesn’t charge any fees but it does place restrictions on your account, preventing you from taking cash out or using your card, until you bring the balance back within your agreed limit.

How do I open a student bank account?

You can apply for a student account from age 17 or 18 – we explain the age limits for each provider in the table above.

Barclays, HSBC and Santander have opened up their student accounts to degree apprentices in their first year of a qualifying course, as well as those studying at university.

As with all bank accounts, you’ll need proof of identity (passport, birth certificate, driving licence) and proof of address.

You’ll also need the UCAS confirmation letter from your university (or copy of your Apprenticeship agreement signed by your employer) as unconditional proof of acceptance.

Some banks may accept a copy of your A-Level results if you have a conditional offer but you’ll need to check first.

Can I apply online?

Even though most banks will let you start the application process online, they may ask that you visit a branch with proof of identification before you can actually start using it.

Barclays is an exception – students can open an account in minutes by downloading its mobile banking app, uploading a selfie video and scanning an identification document with their UCAS code. If you don’t have a UCAS code, you’ll need to visit a branch to complete your application.

Can I open more than one student bank account?

You can’t open multiple student bank accounts with the same provider and some providers explicitly say that you shouldn’t already have a student account when you apply (HSBC and Nationwide).

Others ask that you use them as your main student account (Barclays, NatWest, RBS, Santander) so although you could potentially open a second student account with these banks, they reserve the right to close it if you’re not paying in your loans and other income.

It’s also worth remembering that having access to a larger overdraft is risky as you will have to repay student overdraft debt when you graduate.

You can apply for an additional standard current account without an overdraft facility – and digital banks such as Monzo and Starling offer innovative smartphone helps that could help you manage your student loan and keep on top of spending.

Can I switch my student bank account?

Yes, you don’t have to stay with the same provider for the duration of your course.

All of the accounts in our table are signed up to the ‘switch guarantee’ which means you can switch student accounts in just seven days.

Before you switch, check that your new bank will match your current 0% overdraft and offer the same terms as other students in that year of study.

Find out more: How to switch an account in seven days – a step-by-step guide

What happens to my student bank account when I graduate?

Once you’ve got your degree, banks will usually convert your student account to a graduate account, but make sure other banks don’t beat it.

Some graduate accounts are only open to existing student account customers (Bank of Scotland, Lloyds, Nationwide, Santander) but most are open to anyone who has graduated from university within the past two or three years.

You may face a sudden drop in the amount you can borrow interest-free when you graduate so plan ahead to avoid hefty charges.

Find out more: Which? tips to help you clear your student overdraft debt

What is a graduate account?

Most high street banks offer current accounts specifically tailored to graduates, with generous interest-free overdrafts for up to three years.

Annual limits vary from £1,000 to £3,000 and tend to reduce each year, to encourage you to start clearing your overdraft.

You’re eligible to open most graduate accounts for two or three years after finishing your course – when you apply, the bank will ask to see your degree certificate as well as proof of ID and address.