My Five Favourite Student Accounts

If you're headed into higher education this autumn, make sure you pick the best bank account for you.

If you’re off to University this autumn, you probably have a lot on your mind right now. What will your halls of residence be like? Do you need to buy text books, saucepans or a crate of lager before you depart? Will you make new friends as good as the ones you have back home?

In the weeks before I started my degree, my friends and I spent more time finding out about pubs and the male student population than we did talking about finance. We were young and foolish (definitely not with a capital F) -- and, as a result, most of us got into some sticky situations while we were at University.

Smart students bank better

Choosing the right student bank account is important for young people who’ve never been in charge of their money before.

Getting to grips with budgeting, interest rates and how financial products work might be among the most important things you learn during your degree -- although obviously you won’t get marks for it!

If you ask about their student packages, most banks will bombard you with information. Unfortunately, they’ll tell you mostly about the freebies and incentives they have on offer -- and these are often used to mask the fact you aren’t getting the best deal available.

Below, I’ve rounded up the top five student accounts for the coming academic year. I’ve based this mainly on the size of the interest-free overdraft on offer in the third (and in most cases, final) year of a degree course, as this is the key issue for most students.

* The same account is available and operable through both Halifax and Bank of Scotland branches.

The small print

As you can see, Halifax Bank of Scotland tops the table, as it did last year. Its offer of a £3,000 interest-free overdraft throughout your degree is unmatched by any other bank.

Anyone opting for the Halifax Bank of Scotland account should remember these words of caution, however: no one is guaranteed the full £3,000 overdraft. If you’re originally granted a lower limit, you may have to do some nifty negotiating to increase it.

On the other hand, having the massive £3,000 limit in year one could spell disaster for some students. As I know from bitter experience, it’s all too easy to use an overdraft just because it’s there -- so be careful!

Also worth a mention are Halifax’s extortionate bank charges. The wrangling over whether these are legal rolls on -- but in the meantime, anyone opting for the Halifax student account should be aware they’ll be heavily penalised if they exceed their agreed overdraft limit.

Usually, details of unauthorised borrowing charges are buried in banks’ terms and conditions. I’ve included them here because students are often bank charges victims -- and I think it’s important you know what you’re up against, no matter which account you choose.

What if I’m in credit?

If you’re lucky enough to be regularly in credit in your student bank account, HSBC’s offering might be the best choice for you. It pays 6% interest on account balances up to £1,000 -- 60 times what you’d get if you went with NatWest or the Co-Op!

Alternatively, students who don’t need an overdraft might be tempted to take an interest-free one anyway, putting the dosh in a top savings account so it generates profit. However, this can get complicated -- so it’s best left to committed Fools.

What about the freebies?

You should only consider an account laden with freebies and special offers if you know you’ll be able to stay within the lower interest-free overdraft limits they offer.

In this case, my top pick for English and Welsh students is NatWest’s student account.

While the technological incentives available look swish, the real gem is the free five year 16-25 Railcard you’ll receive if you open an account. The card alone is worth £120 (five subscriptions of £24), but it will also save you a third on most train journeys.

Having recently become too old for a Young Persons Railcard (as they were called in my day) I can tell you I miss those discounts!

Luckily for them, Scottish students won't need to choose between a chunky 0% overdraft and a load of fab freebies. 

The Royal Bank of Scotland's Student Royalties account offers a range of incentives for those studying north of the border -- customers can choose between a £100 sign-up bonus or the bank's travel goodies, which include a five year 16-25 Railcard and a month's free bus travel in Edinburgh, Glasgow or Aberdeen.

Even better, the 0% overdraft available (£2,750) is only £250 shy of the maximum on offer elsewhere.

Pass it on!

If you know people who are headed into Higher Education this autumn, why not share this article with them? You can email it to friends and relatives or post it on social networking sites by clicking the ‘Share this content’ button above.

And if you’re the one about to step into the great unknown in a few weeks’ time, remember these words of wisdom: have fun, stay safe and spend savvy!

More in our Student Special series: Managing Your Finances At University | Students: Reduce Your Bills! | The Debt All Students Should Avoid | Keep Your Stuff Safe At University | Money Saving Tips For Students | Money Talk Podcast: Everything Students Need To Know About Money