Student and graduate bank accounts

The type of bank account you use for everyday banking needs is a current account.

Nearly everyone is eligible to open a current account, which usually includes a range of standard features:

• overdraft facilities (there will be a charge of up to 40% to use this)
• debit card/cash card
• internet and phone banking
• online or printed statements
• interest on the money in the account
• ability to set up Direct Debits and standing orders.

The main difference between current and student accounts is the overdraft facility.

Some student accounts allow overdrafts of up to £3,000, interest free.

This means that you don’t have to pay interest on anything within the authorised overdraft limit while you’re a student.

But remember, this isn’t free money. After you graduate, you still have to repay everything you have borrowed.

The overdraft limit set by the bank when you open an account with them might be an ‘up to’ amount, increased only by agreement during the time that you’re a student.

If you go beyond your authorised overdraft limit additional charges might apply.

You should speak to your bank immediately, if you think that this is likely to happen, as it could hurt your credit rating and ability to borrow in the future.

When it comes to student accounts, competition between banks and building societies is high.

Because of this, some offer ‘freebies’ in addition to overdrafts to tempt you into opening one of their accounts.

For example, one incentive offered is a free four-year 16-25 Railcard (not available in Northern Ireland). You can use it to get a third off train tickets, and it will also save you money on Transport for London (TfL) off-peak fares.

Despite the name, the 16-25 Railcard is available to all full-time students in higher education (and anyone not a student in that age range).

While freebies can be a nice bonus, don’t let them affect your decision.

Make sure the bank account you choose offers all the features that you need.

Most payments you make and receive will be through your student bank account.

You should set and stick to a realistic budget, to stay within the authorised overdraft limit that you’ve agreed with your bank.

Some banks offer credit cards that are available alongside student accounts.

These cards usually have fixed and relatively low credit limits.

While credit cards can allow you to make bigger, one-off purchases to help with your studies it’s important not to see them as a replacement for daily spending.

If you miss a repayment, even the minimum, you’ll receive penalty charges and might damage your credit rating.

Online and mobile banking allows you to make payments more easily.

The service ‘Paym’ allows payments between people who have registered their mobile numbers. Remember to double check the details of who you're sending money to via bank transfer, and be aware of scammers. 

Keep track of any payments you make so that you stay within your authorised overdraft limit.

Here are some tips to help you manage your account safely and prevent fraud:

• always shield your PIN at cash machines
• try not to use shared computers or tablets to access online banking
• never transfer money out of your account to "keep it safe" this is a common scam.
• regularly check your bank statement or online banking to make sure there are no errors
• never store your Personal Identification number (PIN) with your bank cards.

There have been reports of young people being targeted by scammers over social media.

• Watch out for offers of ‘free money’ that seem too good to be true. You could be handling money used for drugs, people trafficking or terrorism. This is known as being a "money mule".
• Don’t share your bank details with strangers, and never let anyone else have access to your accounts.
• Report any suspicious messages to Action Fraud and if you think you might have already been scammed let your bank know.

Comparison websites can be a good starting point for anyone trying to find a current account tailored to their needs.

Be aware that comparison websites won’t all give you the same results. So make sure you use more than one before deciding.

It’s also important to do some research on the type of product and features you need before making a purchase or changing supplier.

Generally, once you finish university or college your bank will turn your student account into a graduate one.

The main reason is to reduce the overdraft amount, that you might have built up during your time as a student.

After graduation, ask your bank the following questions:

• what deals do you have on graduate accounts?
• will I have my overdraft limit reduced? If so, when?
• when will I start to be charged interest on my overdraft?
• will I be automatically upgraded to a graduate account?

These accounts still provide generous overdrafts, but the amount of interest-free borrowing tends to reduce each year that the account is open.

Use this as an opportunity to manage and balance your budget after graduation.

If you opened a student account at the start of your course, it’s likely that it’ll be turned into a graduate account with the same branch, after you graduate.

Consider the following when looking for the right bank account for your needs:

• never go over your overdraft limit
• don’t be loyal to your current bank – shop around!
• go for the longest 0% interest overdraft that you can find
• focus on the associated perks of opening with a particular bank
• check your credit rating before you apply for a graduate account
• budget to clear off your overdraft as soon as possible (if you have one).