Bank Overdraft

Student bank accounts and overdrafts

Every autumn the banks launch their annual charm offensive on a new batch of student freshers. Most student accounts offer free gifts and interest-free overdrafts but why do the banks do this? Well, maybe they’re just being helpful because they know students are poor but there could be another reason…Did you know that over a lifetime, we are more likely to change our partner / get divorced than shift our bank account? Students are a great source of future potential profit for the banks. By seducing you now with free mobile phones, MP3 players and the like, not to mention that handy free overdraft facility, they are banking (if you’ll excuse the pun) on your business (the interest the bank will earn on your current account, overdrafts, mortgages, loans and savings) for many years to come.

Pros

• Its well worth taking advantage of the free overdraft facility. Maximum limits vary and often increase for each year of study so shop around before opening your account.
• Online / telephone banking - a useful way to keep an eye on your spending.
• On-campus branches. Your student loan and most wages for part-time work will be paid directly into your account but to open your account, pay in cash or cheques or sort out any problems you often need to go into a branch - make sure there is are accessible branches near your university and in your home town.
• Free graduate overdraft facility after graduating - but remember this does not last forever and eventually you will have to start paying interest on your overdraft.

Cons

• The free gift! Don’t be swayed by this -  the amount of free overdraft and accessibility of local bank branches should be the deciding factors in your choice of account.
• Beware of spending beyond your agreed overdraft limit as bank charges can be astronomical (you could be hit by a £30 fee each time you use your debit card plus interest on top). Banks often allow you to spend beyond your limit so check your balance regularly.
• Be particularly watchful if you pay for something by cheque. The cheque may not be presented immediately and it is easy to forget about it when calculating how much you have left if your account.  
• Many student accounts are generally only available to UK residents not EU and International students. This is not the case for all student accounts however although it is generally harder for international  and EU students to open them. Some banks have special accounts designed specifically for International and EU students. Visit as many banks as you can and see what they have on offer.
• It is not normally possible to open more than one student account.

How to open a bank account - guides for UK, EU and International students