Finishing school and heading to university is hugely exciting, however with great freedom comes great responsibility. Suddenly you are being questioned on complicated things like student finance, housing, and module choices! Here at Guarantor My Loan we understand how overwhelming this all can be, so we thought we would help you make a start, by answering all your FAQs about student bank accounts.
Firstly, what is a student account?
A student account is different from a standard current account before there is an interest-free overdraft, which can go up to £3,000. (See our Guide to Student Banks to find out which bank has the best offers!)
When should I open my student account?
As soon as you have you offer letter from UCAS (even if conditional) then you can open your student account. We would recommend getting it all sorted before heading off to university, as it is one of those things that can find itself at the bottom of the to-do list this summer. Also, you will need items that you may forget to bring with you to university, such as proof of your home and term time address, some identification (passport, driving licence or birth certificate) and your UCAS letter. We advise you get it done and out of the way now, and so you can just forget about it!
What will I need to open my student account?
Most will require proof of your home and term time address, identification, and your UCAS letter, but check the banks website for more specific details.
I’m no longer in first year, is it too late to get a student bank account?
No it is not too late, but once you’ve graduated it will benefit you to switch to a graduate account.
How do I pick the best account?
Beware of the freebies!
Banks will try and throw lots of cool freebies at you to try grab your attention, but this is just to distract you from what you should really be looking at – the main offer. Most banks require you to put your main source of income in their account (your student loan), and so you can’t open multiple student accounts to grab all the freebies. The only exception is the free 4-year railcard from Santander, which you can keep for the full 4 years even if you leave after one!
Choose the best overdraft
The bigger and longer the 0% overdraft facility, the better.
This means you will be able to borrow the most amount of money without being charged ridiculous interest rates over the longest time. Plus on top of this, you can actually make money earning interest on the borrowed money whilst you’re a student, which means you are essentially picking up free money!
However, choosing the best one can be difficult since some banks brag about their huge overdraft yet they actually often only give out a fraction of this to students. Check out if the amounts are ‘up to’ or ‘guaranteed’ as well as looking at feedback sites. Or just check out our Guide to Student Bank Accounts which simplifies it all for you in one place.
Know your credit rating
Find out what banks already think of you and your risk level, as this will affect how much overdraft they will award you. Your credit score depends on things like spending history, past borrowing, income stream and so on. If you have a bad credit score, then it may be best to go for a student account which has a high guaranteed overdraft amount, rather than a high potential amount. Or visit our blog on how to improve your credit rating.
Visit Credit Reports Matter to find out your free credit report on a free trial, however make sure you cancel it after the free trial if you don’t want to be charged. You can do this by calling 0808 189 0346
Applying to a bank with a branch near you can be worthwhile in times when you need to make a cash or cheque deposit, hand over documentation, or need face-to-face assistance. Moreover, you should consider whether there are cash machines in campus or close to where you live, and whether other banks’ machines will charge you. Also, finding out whether there is a student adviser can be beneficial, since they will be more sympathetic to your financial situation than a normal adviser. This should not be top of your list in importance, but is worth thinking about when selecting a Student Bank Account.
Know your limits!
Going over your overdraft limit without permission will cost you greatly in interest and penalties. You may be able reclaim bank charges for overdrawing, but this often includes a lot of hassle. To avoid this, make sure you talk to your banks before going over the limit, as a mistake on your part could lead to credit rating problems in the future. See here for more information on credit rates
More money more problems?
Although you won’t be paying interest on this borrowed money, it will still have to be repaid one you finish university, so don’t go crazy! Budget your money carefully and avoid spending more than you need to, as you may get yourself into a mess if you can’t pay it back. Check the repayment conditions, then contact us as to how a guarantor loan can help with your debt consolidation.
What if I don’t need to borrow money?
Even if you don’t need the overdraft, you can still use it for your own benefit. Since the overdraft has 0% interest up to a certain amount, you can borrow this money and put it into an instant access savings account which will generate you a profit through the interest generated. This profit may not be huge, but it will still make you more money than a few shifts in a bar, and it’s certainly easier! All you have to do is remember to put the money back into the account at the end.
We hope this guide has helped you understand more about student bank accounts, and will help you make your choice. Now you understand it, visit our comparison of banks in our Guide to Student Bank Accounts to help you make your decision from an unbiased point of view.
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