Student bank accounts: Where to find the best deals

17 August 2017

Banks are fighting for new customers, so if you’re just starting university or college don’t delay in signing up for one of their top offers.

The start of the new academic year is upon us and many students will be moving away from home for the first time.

Banks are desperate to get students signed up as customers as they believe if you open an account at a young age you’re likely to stay a customer for life.

This is why there are so many incentives for students to sign up with each provider. This year, there are a wide choice of options available depending on whether you’re looking to earn interest on your balance, or, more likely, eager for an interest-free overdraft and a raft of freebies.

Where can I get the best deal?

Everybody likes to get something for nothing, such as the freebies on offer for new students.

Unlike the standard current account switching incentives, you don’t have to move any existing accounts over to take advantage of these deals. However, you will be rewarded with vouchers and freebies, rather than cash.

The top deal this year, which is the Moneywise Best Buy Student Account for 2017/18, comes from Santander. Its 123 Student Current Account comes with a free four-year 16-25 Railcard. This gives users a third off most rail journeys in the UK and normally costs £30 a year, meaning the freebie is worth £120.

When opening the account, you must register for online banking and subsequently pay at least £500 into the account each academic term – this could be your student loans, for example.

Thanks to this offer, Santander proved the most popular bank for new students in 2016. Research by CACI, a marketing and data company, shows the bank took a 41% share of the student market during the year.

The railcard is a popular option for many people, but if you travel between home and university by coach, you may prefer the student bank accounts from NatWest and Royal Bank of Scotland. These accounts give users a free National Express Young Person’s Coachcard for four years, which is worth £10 a year – so £40 in total. Cardholders get a third off standard adult coach fares with National Express. You will need to sign up to online banking and receive paperless statements to get the card.

If you don’t travel by train or coach, HSBC’s student account offers a free £60 Amazon gift voucher plus a year’s subscription to Amazon Prime Student, worth £39. To open this account, you must be in the first year of your course and apply by 31 October 2017.

The HSBC account is the only one with a time limitation.

Top interest-paying accounts

Research conducted by Zurich shows that rather than using traditional savings accounts, 44% of students prefer to use a current account instead. So picking an account with a good rate of interest can help top up your income.

As well as having the most valuable freebie, the Santander 123 Student Current Account also pays 3% interest on balances from £300 to £2,000. This means if you maintain a balance of £2,000 or more for the full year, you’ll earn £60 in interest. Smaller balances also earn interest. If you have a balance of between £100 and £200, you’ll earn 1% and balances between £200 and £300 earn 2%.

You can get a higher rate of interest from TSB – it pays a hefty 5%, but only on balances up to £500. Over a year, you would earn £25 if you keep your balance above this level.

Best student accounts for going overdrawn

Going to university often means managing your own finances for the first time, so you might want to consider getting an account with an interest-free overdraft.

This means that even if you go overdrawn, you won’t be stung with high charges or penalties. But remember these overdrafts must be agreed in advance, and if you exceed your agreed limit then you will still face penalties.

The best deal comes from Halifax, which offers an overdraft worth up to £3,000. The overdraft remains in place for the entire length of your course, plus another year after your graduation. This account also pays interest, but only at a paltry 0.1%.

Another option is Nationwide’s FlexStudent account, which offers a guaranteed £1,000 overdraft in your first year. This will then rise to £2,000 in your second year of study and £3,000 in the third year. Nationwide also pays 1% interest on balances up to £1,000. Plus it has no charges for withdrawing cash or spending abroad – so this card is especially handy for students who frequently travel or are planning to work or study abroad as part of their course.

Top tips to keep your student finances in order

Work out a realistic budget If you’re living away from home for the first time, it can be difficult to work out exactly how much you’re going to spend. Keep track of your outgoings using a budgeting app, such as Monzo, as this will help you to plan your future spending.

Get a student job

A part-time job is an ideal way to bring in some extra cash alongside your study. Jobs in shops, restaurants, bars and call centres are popular among students. Your student union will have details of opportunities in the local area.

Make use of your student discounts

Perhaps the biggest weapon in your money-saving arsenal will be the student card provided by your university. Many major retailers such as ASOS, Schuh, Topman and Topshop offer students a 10% discount all year round. You will also be eligible for discounts and freebies at food outlets including Domino’s Pizza, McDonald’s, and Yo Sushi.

 Best student accounts for 2017/18


Interest-free overdraft in first year (i)

Interest paid



Up to £3,000

0.1% on all balances



Up to £1,000


£60 gift voucher plus a year of Amazon Prime Student

NatWest and Royal Bank of Scotland

Up to £2,000


Four-year National Express Young Persons Coachcard



1% on balances up to £1,000



Up to £1,500

3% on balances from £300 to

Four-year 16-25 Railcard


Up to £1,500

£2,000, 2% between £200 to


(i) All of the providers bar Nationwide offer 'up to' overdraft figures. Nationwide is the only provider to guarantee its headline overdraft. Source: Moneywise, 2 August 2017.

“Having an overdraft facility is vital”

Lewys Thomas, 24, has just graduated from Swansea University. In his first year of study, he used a standard bank account but found it difficult to manage his finances. So before his second year, he opened a Santander 123 Student Current Account.

“I had been with my old bank since I was 16, but I found it difficult not having an overdraft when I fi rst started university,” he says.

He estimates that he is better off by £800 over the past two years through paying zero overdraft fees, earning some interest and using his railcard to travel home and to visit friends at other universities.

“Having a student account has been vital to me. I know some friends of mine have spent huge amounts on overdraft fees,” he says.

Lewys’ advice for new students is: “It may seem obvious, but make sure you budget properly. It seems like you get a lot of money when your loan comes through, but you have to make it last the whole term.”

Moneywise verdict

There are a wide range of accounts depending on what you’re looking for. So don’t be tempted by banks at your Freshers’ Fair offering a free mug or packet of sweets for signing up to a student bank account. You can get much better deals by being clever and shopping around.

Remember you can usually open these accounts before your university term starts, providing you have proof you’re starting your course – such as your UCAS confirmation letter. You will also need proof of both your ID and address to open an account.

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