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Best Student Bank Accounts 2012/13

Author: John wallyo

Looking to open a student account but not sure which bank to go with or how to apply? Well you’re in the right place!

This popular guide has everything you need to know on one page.

We’ll first go over some of the important points in choosing a bank before ranking the best student bank accounts for this year.

Banks want YOU!
Banks are actively targeting students, more than any other group of the population.
There’s good reason, too. Students are essentially investing in themselves to (hopefully) get a higher than average salary when they graduate.

Whilst you may be borrowing now to fund your education, banks expect that, in the near future, you will reap the rewards and they hope that you stash your earnings away with them.
Banks are looking to establish loyalty, and have good odds at keeping you for life once you’ve opened a student bank account with them.

Just remember that you don’t have to be loyal, and you should switch banks if necessary to benefit from the next best deal. It may seem like too much effort, but switching can pay dividends for many students and graduates.

What do I need to open a student bank account?
There’s not too much you need to open a student bank account. At the least you will be required to show:

One or two forms of photo ID: such as a passport or driver’s licence
Proof of address: such as a recent utility bill or bank statement
Proof of student status: a letter of acceptance from your university, or UCAS offer letter.

Most banks now allow you to apply online for a student bank account, but you will still have to send off supporting documents or take them into your local branch. Documents must be original copies, not photocopies.

When it comes to requesting an overdraft amount, the banks will check your personal credit rating. It is worth checking your score beforehand to know what you can expect when applying. You can currently get access to your report on a free trial with Credit Expert.

5 big tips for choosing a student bank account

Beware of the student bank account “freebies”
Don’t be taken in by freebies! Short-term offers including free products, insurance, cashback rewards and other useful things may sound very appealing but you need to be smart.
A student bank account offering a free MP3 player worth £20 is nowhere near as good as getting a large interest-free overdraft for 3 years or more. More on this below.

Go for the largest student overdraft
An arranged overdraft is a common way of borrowing money through your current account. The best thing about a student account is that money borrowed through an overdraft has 0% interest. With an interest-free overdraft you pay back nothing more than what you borrow. This is unique to student bank accounts, so take full advantage of it!

Even if you don’t feel like you need the full overdraft, still apply for it then take some of it out (interest-free) to pump up your savings account. Now you’re playing the system! You actually make money by earning interest on the borrowed money whilst you’re a student. We’re not talking mega-bucks, but for something so easy to do, it’s not a bad return!

Beware that the 0% interest period is not forever! It only lasts a certain number of years after you graduate before interest charges set in. You’ll need to starting paying up before you start getting screwed by higher repayments. Just as importantly, don’t ever go over your arranged student overdraft limit or you could suffer hefty bank charges.

Is the overdraft “up to” or “guaranteed”?
It’s worth noting that the advertised student overdraft limit is often the maximum you can get. This amount is usually only available in your final year at university and only to students with a decent credit rating (you can now get a free report with Credit Expert).
For example, some high street banks such as Halifax attract students by offering an overdraft of “up to” £3,000. However we know that many students have claimed never to have received the full £3,000 at any point during university.

Know the repayment conditions
In a recent survey we conducted, 65% of students asked said they didn’t really know when they have to repay their student overdraft. Sure, you probably won’t have to repay it until after you graduate, but by then it can be too late and the sudden demand for £3,000 can be quite a shock!

After university, most banks automatically turn your student account into a graduate bank account which deals with repaying your overdraft over a certain period. Take a look at our graduate bank account guide which lists the top accounts on offer to graduates and gives you an idea of how much money you are likely to have to pay back and how quickly.

Know your credit rating
Finally, if you can find the time, it’s worth knowing what the banks already think of you (from a risk point of view). The amount of overdraft they will award you depends on your credit score (spending history, past borrowing, income stream etc).
Luckily you can get a free credit report for yourself online through Credit Expert. We’ve used this service ourselves and it’s the best we’ve come across, though you will need to cancel your free trial once you’ve received your report. You can do this easily by calling the freephone number 0800 561 0083.

Hopefully things are a bit clearer for you now. With this information in mind, below are the best student bank accounts for 2012, taking the overdraft interest-free terms into account.

1. The Co-operative

Best Feature
£2,000 guaranteed overdraft

For the second year running, The Co-op are ranked as the best student account for 2012. Why? Simply because they offer you the best guaranteed overdraft.

As we know, the overdraft amount is the #1 thing to consider when comparing student bank accounts. The Co-op student account offers a guaranteed 0% interest overdraft of £1,400 in the first year, £1,700 in year 2 and £2,000 in year 3 when you open with at least £300 (your student loan).

Some students can potentially get more with the Halifax account (see below) but you’ll need a very good credit score. In any case, it’s worth getting a free credit report (with Credit Expert) to see whether you’d be likely to get the full overdraft with Halifax.

Extra info
The Co-op are well known for their student account customer service and ethical banking stance, so if you want to bank with a company that you know will look after you (and your money) then they could be your best bet.
If you go over your overdraft limit then you will be charged 18.9% EAR and 9.9% if you arrange it with the bank beforehand.

Watch out for…
Be aware that the Co-op do not offer a graduate account as such. You can either switch to an alternative graduate account after university or the Co-op allow you one year after you graduate to pay off your 0% overdraft in full.

2. Halifax / HBOS

Best Feature
£3,000 ‘up-to’ overdraft
Halifax offer a great account for students looking to get their hands on the largest 0% overdraft. This student account offers an overdraft of up to a massive £3,000.

Keep in mind that in your first year you are unlikely to top the £1,000 limit. When you apply you automatically get a £500 overdraft, so you need to ask for more throughout the years that you are at university and it will be judged case by case.
The actual amount you get depends upon your credit rating (check yours for free) and some students have reported in the past that getting the full overdraft is hard.

Extra info
The Halifax student account pays you 0.1% AER interest on all positive balances, which isn’t much but every little helps doesn’t it?

Watch out for…
Don’t go over your overdraft limit with this account! You will be charged 24.3% AER as well as a monthly fee of £28 which will make the situation a lot worse.

You have one year after graduating to repay the whole overdraft amount before interest starts being added. So don’t forget!

3. Santander

Best Feature
£50 for switching

Santander have been working hard this year to draw students in, and so have upped their offering to make it into our top 3.

You will be offered a guaranteed overdraft of £1,500 in the first, second and third year. On top of this, it is one of the only accounts to offer a noticeable amount of interest on positive balances (1% on the first £500).

Extra info
If you want to get your mitts on the free £50 for switching your account to Santander, make sure you apply by 30th November 2012.

Watch out for…
Going overdrawn will see you being charged £5 a day, so be careful with your budgeting!
The Santander student account was voted by students in 2011 as having poor customer service.

4. NatWest/RBS

Best Feature
Free Railcard (existing customers)

The Natwest and RBS accounts are extremely similar in offering a guaranteed £1,500 overdraft by year 3 as well as a free railcard, but now only to existing customers.

The Natwest student bank account offers an overdraft up to £1,500 over the three years and a possible £2,000 for 1 year after leaving university.

It is a tiered structure in which you will get a 0% overdraft limit of £500 in the first term, £750 in the second and £1,000 in the third. After this you are guaranteed to get around £1,250 in the second year and £1,500 in the third year.

To get the full overdraft you must deposit £750 every 6 months (your student loan).

Can you still get the Natwest student railcard?
Unfortunately, as of 2012, the NatWest and RBS bank accounts no longer offer the free 16-25 railcard to new customers. If you are a current customer you must have had an account with them from before 15th April 2012.

NatWest customers get a 4 year 16-25 railcard and RBS customers get a 3 year railcard plus 4 week bus pass (check their websites for more details).

Watch out for…
If you go over your overdraft limit then you will have to pay a pricey £6 daily fee.
New customers can no longer get the 16-25 railcard with this student bank account, hence its 4th position this year.


Best Feature
£3,000 ‘up-to’ overdraft

The HSBC account is actually very similar to the Halifax student account this year, and just making it onto our top 5 list for 2012/13.

There is an overdraft of up to £3,000 in your third year but once again you must apply for it on a case by case basis. The only amount you are guaranteed is the £500 overdraft you receive when opening your account.

Extra info
A key benefit of the HSBC student account is that it pays 2% in interest for any money you have in the account up to £1,000 in your first year.

Watch out for…
It is very hard to get the maximum overdraft of £3,000 (again, check your credit score) and only £500 is guaranteed. You will have to contact HSBC bank in order to increase your overdraft.

Remember the top student bank accounts change each year, so make sure you’re still getting the best deal as an existing student and check back here for the best banking advice for students. To make things easier, register to keep in the loop and also be informed of the best student deals handpicked by us every week!

Other factors to consider
Does the student bank account come with a debit card or a cash card? You can withdraw from ATMs with both, but only pay in shops or online with a debit card.
Can you access your student account online?
Have a look over the bank charges.
Branch location. A local bank can prove be worthwhile but not essential, especially on that rare day when you want or need to make a cash or cheque deposit.

If you want help with managing your money, then look at bank account alternatives such as the account with thinkmoney. This is a budgeting account and manages all of your outgoings on your behalf, and predicts any potential problems with your finances within 3 months. There is no overdraft so you won’t be tempted to overspend and therefore face any bank charges. There is a monthly fee of £14.50 for the account.

This post will be updated annually to keep up with the current best student bank accounts. We always do our best to make sure that the research is up-to-date and correct but Terms and Conditions may change.

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