The best bank accounts are chosen each year based on the criteria in the student bank account comparison table below (see it now).

This article will help to give you an overview of student bank accounts and what they have to offer. It contains quotes from top student money experts and will help you make an informed decision when choosing your student bank account.

Incentives will always be there to tempt you but it’s time to be financially savvy and look at the bigger picture. You don’t want to leave university more in debt than you already are. Choosing the right account could save you money in the long run so it’s best to shop around.

Student Bank Account Incentives aren’t the real deal

The first thing to realise is that incentives are just there as a distraction. As alluring as they sound they should not be the main reason for choosing an account. While many accounts offer freebies – such as a free five-year 16-25 railcard with Natwest – it is worth remembering that a railcard only costs £26 a year and so really the saving isn’t that much. Also, Natwest’s terms have changed recently and applying for the railcard is only available to current customers and even then it’s not guaranteed.

You can easily accumulate over £26 worth of overdraft charges if you haven’t chosen the right account. Banks know that many students are young and naive and use this to their advantage; offering a railcard or discount on mobile phone insurance is an easy sell to many.

How important is a big student overdraft?

The student account with the biggest overdraft should be one of the biggest draws. You want to choose the account with the biggest 0% borrowing for the longest period. This is particularly important because if you go beyond your 0% overdraft you will incur huge bank charges, which obviously is something every student wants to avoid.

The Bank of Scotland and Halifax student account offers one of the best deals on the market at the moment with a whopping £3,000 overdraft for up to five years. This is available from year one if you request it and it is agreed.

Andrew Hagger of Moneynet says: “If you’ve done your sums and you’re likely to need to borrow £1,500 plus from year one, then Halifax and Barclays should be your first port of call. Just because you have the limit it doesn’t mean you have to use it, but at least it’s there in case you do.” If you’re worrying particularly about money then this will be an advantage to many. It is interest free after all.

However, although it is possible to get £3,000 this amount isn’t guaranteed. Unless you have a great credit rating, which most students don’t, you probably won’t get this limit. You are given £500 automatically when you open your account and then have to apply for increases, which you will get depending on your circumstances.

However for some students the thought of having £3,000 in your bank account in year one can seem daunting. If you are lucky enough to be given the maximum in year one then you have to make it last for a full five years. So if you’re not the best at managing your money this may be worth thinking about.

Although interest free, £3,000 is a huge amount which you will have to pay back at some point. “Having a large overdraft may be of benefit to some, but a lower staggered overdraft may be useful as an incentive to not overspend,” explains Darren Cook of Moneyfacts.

If you think you really don’t need £3,000 and will just get allured into spending it on unnecessary items such as clothes then think twice about whether this much to pay back is sensible.

Tiered student overdraft or not?

Having a huge overdraft is not for everyone and if you’re wary of the possibility of having so much money at once then do think carefully. Tiered accounts are useful as way of managing your money and will make your money go further.

Natwest, RBS and Lloyds TSB both offer £1,000 in year one, which is tiered so you receive £500 in the first term, £750 in the second term and £1000 in the third term. Lloyds then gives you up to £1500 in years two and three and up to £2000 in years four and five. Natwest offers £1250 in your second year and goes up in equal installments of £250 up to year five. This will give you a limit of £2,000 in year five. This is useful as it helps students manage their money more effectively and prevents overspending.

‘Up to’ but not guaranteed

Another thing to be wary of when choosing the right account with the right overdraft is that many big banks will say ‘up to’ but not guaranteed.

Halifax and Bank of Scotland do offer a £3,000 interest-free overdraft but it’s not guaranteed. If you want to be sure of securing a certain overdraft amount then there are accounts which offer guaranteed overdrafts. For example, co-operative bank offers the highest guaranteed overdraft of £1,400 which can be increased to £2,000 over the three years. This is subject to account activity being satisfactory. However, it is harder to get accepted as a customer of Co-op compared to other banks so only apply if you think your credit rating is good. You can check your credit rating  for free here. Just remember to cancel the trail once you’ve got it.

Halifax and Bank of Scotland could potentially offer you a larger overdraft though, £3,000, depending on your credit rating. Also Co-op only offers an interest free overdraft for three years where as many other banks offer this for five or more. This is an important point and will be a disadvantage to many students.

The top student bank accounts for 2011/2012

Make sure you check out our student bank account comparison table so that you can make a decision based on all of the available accounts.

#1 Co-op

The Co-op student bank account is one of the best this year because of the guaranteed overdraft and helpful customer service.

You will get a 0% overdraft of £2,000 in the 3rd year, £1,700 in the second and £1,400 in the first. To guarantee your maximum overdraft limit you may need to have a good credit rating and you must deposit £300 when you open the account (which will just be your student maintenance loan).

Check out what Co-op have to offer and see why they are our number one student bank account for 2011 at their website.

#2 Halifax / HBOS

Halifax has risen from 3rd to 2nd in our ranking this year, but it still offers the highest overdraft, up to £3,000 interest free, available from year one. Although in your first year you are unlikely to top £1,000. When you apply you automatically get a £500 overdraft, so you may need to ask for more when you need it. The actual amount you get will depend upon your credit rating (check yours for free). You have one year after graduating to repay before interest starts being added. Don’t forget!

They also offer a low interest rate of 7.2% on agreed overdrafts beyond the 0% limit but be. Offers a 25% discount on AA breakdown cover. Also offers commission-free foreign currency and traveller’s cheques. Internet and telephone banking are also available.

#3 Royal Bank of Scotland/NatWest

The Royal Bank of Scotland has moved into third spot this year alongside it’s partner bank Natwest, offering an impressive £2,000 overdraft at 0%. Like the others, the overdraft limit is an ‘up to’, in your first year you should expect to get closer to £1,250 and then £1,500 in your third year dependent on your credit rating.

The student railcard offer is only available to existing customers who own an adapt account. To find out if you are eligible it may be advised to call the bank. There are Natwest branches at 55 of the biggest universities in the UK as well as more student advisors than any other UK bank. Offers free text alerts about your account to your mobile. Internet, telephone and mobile banking.

They also have several other ‘special offers’ to seal the deal with freebie loving students.

Be aware that Natwest have also bough in new terms and conditions where you have to deposit £750 every 6 months and also make 3 debit transactions a month. Although your student loan will cover the £750, Natwest and RBS originally planned to do it every 3 months but crumbled under student pressure.

#4 HSBC

The HSBC account is most probably the best of the rest. We have put it in at number 4 this year and by all means you should check it out in comparison with the other student bank accounts.

One positive is that you get 2% interest on any balance up to £1,000 in your first year at university. There is also a whopping overdraft limit of “up to” £3,000 of which only £500 is guaranteed unfortunately depending on your circumstances and credit history (which you can check here for free).

#5 Lloyds TSB

They Lloyds TSB student account is great for students looking to take a 5 year course. The fact of that matter is that over the 3 years Lloyds TSB only offer an overdraft of £1,500 and the £2,000 0% overdraft is only available for students in their 5th year at university. Compared to other student accounts such as the Co-op and Halifax it simply doesn’t compete.

However, there are some great freebies on offer with the Lloyds TSB student account including a free NUS extra card worth £33 a year, LHA membership for 3 years and 40 free music downloads.

#6 Santander

Santander offer a similar account to Lloyds, in that there is a £2,000 overdraft but it is only available in year 5. In the first year you could be looking to get a 0% overdraft up to £1,000 an overdraft of £1,250 in the second year and £1,500 in the third year.

There is also free insurance for mobiles, laptops and other gadgets on offer but be warned with Santander as students in the past have accused them of poor customer service.

#7 Barclays

The Barclays account is a good one to have for a certain type of student. If you can stick within your 0% overdraft limit of up to £2,000, dependent on your credit rating, then you will be fine. However, there are some extremely high charges for exceeding your limits.

They do offer discounts with Phones4u which you can check out on their website.

For a full list of rankings check out our updated student bank comparison table at the bottom of this page. This table offers extra information on the 8 major bank accounts offered to students and you can see which may suit you the most.

If you lucky enough not to need a student overdraft

Although rare, if you’re lucky enough to not need an overdraft then look at the rates paid with balances in credit. HSBC offers the highest rate of 2% for balances up to £1,000 (in 1^st year only).  Most other accounts are 0% or 0.1% so if you don’t think your going to use your overdraft then opt for a student account with HSBC. However this is the exception as opposed to the norm, most students will need to use their overdraft so think carefully before deciding you won’t need it.

Keep an eye on your student bank account

Unauthorised overdraft costs are something you definitely want to avoid as they are very costly. When you have reached your overdraft limit banks will normally still allow you to spend but this will come at a price. Bank of Scotland charges one of the highest amounts for unauthorised overdrafts, at a very steep 24.2%. Try and keep an eye on your account as frequently as possible so as to avoid any unwanted charges. The last thing any student wants is charges as high as these.

Many ways to bank

Of course just going into your local bank is the most traditional way of banking but there are many other ways which make it convenient for you. You can manage your money from the comfort of your own armchair using internet banking. This is ideal if don’t go into town much and want to manage your money with ease.

If you want to talk to someone about your account without having to go to a branch then telephone banking is convenient. And you can even manage your money on the go with many banks using mobile banking. This is ideal if you’re out and about and need to check if a payment has gone out or need to transfer money urgently. HBOS and Co-operative are the only mainstream banks which don’t offer mobile banking so if you think you really would make use of it then this is something to consider.

Location, Location, Location

There’s no point in having a student account with a bank if your local branch is miles away. If you need to pay cash in or cheques then you will need to go to your branch. Also, some people may prefer to talk about any problems face to face rather than over a telephone. Make sure your nearest branch is within each reach of you before choosing an account. Some universities have branches on campus. Natwest has 55 branches on campus at the biggest universities in the UK.

Making the final decision on a student bank account

When it comes to choosing the right account you should choose the account that is best for you. A high overdraft is important but if you are not going to need a huge amount and worry you will waste it then opt for an account with other benefits.

“The whole package should be assessed. Students should be aware of whether they can get an authorised overdraft over their interest free package and also what the charge is for unauthorised overdrafts as these can be very high,” says Darren Cook of Moneyfacts.

It’s important to look at every aspect of the account before making your decision as you don’t want to be stung by high charges that you didn’t know existed. So whether it’s a large overdraft, railcard or the location of your nearest branch that is most important to you make sure you make the right decision for yourself.

Student Bank Accounts

Rank	Bank	Minimum Overdraft	Maximum Overdraft	Incentives & Freebies	Overdrawn Charge	Other Catches
1	Co-Operative	£1400	£2000	None	9.9%	Must deposit £300 when opening
2	Halifax/HBOS	£500	£3000	None	24.2% + £28 a month	The overdraft is not guaranteed.
3	Natwest	£1000	£1,500	Free 5 year 'Young Persons' railcard for existing customers.	£6 a day.	Needs frequent use and deposits every 6 months. Must use online banking
4	Royal Bank of Scotland	£1000	£1,500	Free 3 Year 'Young Persons' railcardfor existing customers.	£6 a day.	Needs frequent use and deposits every 6 months.
5	HSBC	£500	£3000		3% over bank base rate (~4%).	Difficult to achieve maximum overdraft amount
6	Lloyds TSB	£1500	£2000	3 years free YHA membership. 40 free music downloads. Free NUS extra card.	8.2% + £15 a month	Charge £5 a month to use interest-free overdraft.
7	Santander	£1000	£2000	Free gadget (phone/laptop) insurance for 2 items.	£25 a month	Worst unauthorised overdraft bank charge. Must deposit £500 when opening.
8	Barclays	£200	£2000	Exclusive deals with Phones4u.	£22 every 5 days until credited.	Can be hard to increase overdraft

These graduate bank accounts can last up to 3 years but this is a maximum and some end in a year. It is a good idea to use this guide to get the best deal when looking at graduate accounts. Try and remember that it is not always good to be loyal. Shop around to see which graduate bank account suits you the most.

However, be wary as Halifax and Santander do not allow you to take out a graduate account with them unless you previously owned a student account with them.

With most graduate bank accounts you will see your interest free overdraft start to cut down every year. Be wary of this as the charges for not meeting those targets can be scary! If, at any time, you think you are going to go over your 0% overdraft limit it is strongly advised to consult the bank. It could save you about 20% interest.

Most of the accounts will also offer you a graduate loan facility to help you out while you are beginning in your career but it would be best, although they are tempting, to avoid these loans. The banks know you will have to stay with them whilst paying it back and you could be with them for life.

With all of these tips in mind we have come up with this year’s top 3 graduate bank accounts. Also, below this top 3 you will see comparison table of the remaining graduate banks for you to compare them yourself.

#1 Lloyds TSB

The best thing about the Lloyds TSB graduate bank account is that they offer the largest interest free overdraft numbers each year with £1,000 in the 3^rd year being one of the largest possible graduate overdrafts. Along with this their charges are near the least expensive end of the spectrum.

To add to these great incentives you also get 0.1% interest on your in credit balance and your 0% overdraft is guaranteed. This guaranteed graduate overdraft is a great help if you are struggling financially.

#2 RBS

The RBS graduate account also matches the overdraft of the Lloyds TSB graduate account and this is why it comes in at number 2 this year. On top of this great overdraft limit it offers a great overdrawn charge and a good graduate loan APR.

The RBS graduate account is also one of the few that offers an added incentive. With the graduate account you can get discounts and card protection through Royalties Membership Service. Although this is not amazing it is a better incentive than nothing. We all like a freebie after all!

#3 Halifax

The Halifax graduate account may seem like a surprise entry into number 3 but there is a reason behind it. Not only does it offer the largest interest free overdraft in the first year but it also has the lowest interest for an agreed overdraft on the account at 7.2% (remember that the values in the table are for an unagreed overdraft).

However, the Halifax graduate account comes with a small warning. Make sure that you pay back all of your £3,000 back in the first year. A good suggestion is to use this account if you are in credit as you can take out the full £3,000 and put it into a savings account.

For a full list of rankings check out our updated graduate bank comparison table below. This table offers extra information on the 8 major bank accounts offered to graduates and you can see which may suit you the most.

Rank	Bank	Year 1 (0% OD)	Year 2 (0% OD)	Year 3 (0% OD)	Overdrawn Charge	Loan APR
3	Halifax/HBOS	£œ3,000	œ£0	£œ0	24.2% + œ£28 a month	NA
2	Royal Bank of Scotland	£œ2000	£œ1500	£œ1000	17.81% + œ£10 a month	9.40%
4	Natwest	œ£2000	œ£1000	£œ500	17.81%	12.90%
1	Lloyds TSB	£œ2000	£œ1500	£œ1000	16.8% + œ£15 a month	9.90%
6	Co-Operative	œ£2000	£œ0	£œ0	15.90%	NA
7	Santander	£œ2000	£œ1000	£œ500	28.7% + œ£25 a month	7.50%
8	Barclays	œ£3000*	£œ2000*	£œ1000*	£œ22 every 5 days	12.90%
5	HSBC	œ£2000	£œ1000	£œ500	19.90%	8.50%

This avenue caters to those who are looking for a safe place to store a substantial amount of money over a period of time. During this time, not only does the account maintain the security of the funds, but also offers high interest rewards on a yearly basis, making the submission a hugely worthwhile investment.

Many will look at this with a degree scepticism, uttering the all too familiar cliché, “If it looks to good to be true, it usually is.” However during this venture, the process is completely transparent. All figures are pre-determined before submission and you can withdraw your funds at short notice, meaning that in an emergency, your money is readily available.

A typical interest rate for a savings account is around the 4% mark, so over the course of 12 months you are increasing your total by a sizeable amount. In some instances the account will insist on a minimum initial credit, often of around £1000, however this investment results in a much increased rate.

For an investment of under £12,000 you could be earning a whopping £500 p/a for absolutely nothing, so get off to the garden with your shovel and spade, and hurry down the bank.

However with the increase in tuition fees, and the evaporation of many work opportunities in the current economic climate, can you afford to take yourself into a mountain of debt?  We examine the ups and downs of the student loan, and what you are really taking on.

First of all it is important to find out what you are in fact entitled to.  There is no use pondering whether or not to take the jump, if you don’t know what is on offer.  To begin with, everyone is entitled to a loan of £3,145 to cover the tuition fees for that calendar year. You are then allocated a maintainance loan which aims to help cover such necessities as rent, food and probably a lot of drink.  This amount is determined by an evaluation of you and your family circumstances. 

Many factors are considered, including salaries, mortgages and debt.  You will then be awarded a maximum figure – ranging from £3000 – £6500 – that you are entitled to per year.  The premise behind this is that lesser privileged families are unable to fully support their children’s academic studies, meaning that they require more of a helping hand financially.

This all sounds very complicated, but all your fears can be allayed with a quick phone call to a member of your local education authority, who will swiftly let you know how much support you can expect
in the upcoming year.

I know what the pessimists of you out there are thinking, “So does this mean I will be in £20,000 of debt when I finish university?”  The straight answer is yes, but it’s not that simple.  For starters you only start to pay back the money owed once you have finished your course and are earning at least £15,000 per year and the interest rate remains fractionally small, even after the
years that you leave university.

For many of you, the question whether or not to take out a student loan is the same question as whether or not to go to Uni. The majority simply will not be able to afford the next three years without it.  So you really need to ask yourself, do you have to go to university?  For prospective Doctors or Nurses, Teachers or Architects this is a no-brainer, but for those of you on the fringes, you need to spend some time in making a calculated decision on your future.

The key to student loan is remembering that it is not your money. You have borrowed money for an investment, an investment in you!  You are paying for an education that has to guarantee you a better future or otherwise the investment is not worthwhile. By committing to a student loan you are essentially backing yourself to repay it with interest, the question is – are you worth the gamble?

1. Banks are desperate for you to choose them! Students are usually young and likely to have a decent financial future. Banks are more than happy to invest in students by giving them a range of incentives and freebies.
2. Statistically, once a student has opened a bank account they will be loyal to them for the majority of their life. You need to bear the motives of banks in mind before you open an account.
   And remember, you can always switch banks to get the best deal for you!
3. Try not to fall for the freebies too much (although some are worth it)
4. The amount of interest-free overdraft should be your first priority. Students can borrow money throughout their degree with no interest until they graduate. This offer is better than anything else as a student, especially when money is tight.
5. The advertised overdraft is often the maximum you can get in your final year. Depending on your credit rating, banks often fall short of offering students the full amount.
6. Invest any unused overdraft in a flexible savings account. You will then earn interest on the borrowed money!
7. Always be aware of the interest rates on the overdraft once you graduate
8. Watch out for the bank charges for going overdrawn. Never spend beyond your means.