Going to university is an exciting time. But before you immerse yourself in your subject, you need to complete a long list of administrative tasks – one is opening a student bank account!
You first need to get your UCAS confirmation letter and A-level results to shop for UK student bank accounts. Once you have these, you can open an account with student-only benefits, and one of the most important ones is an overdraft.
This article will explain how student overdrafts work and what students need to keep in mind while using them.
A student overdraft is a financial agreement between you and your bank that allows you to borrow more money than you have in your bank account. It is designed to provide a financial buffer while students finish their studies.
Your overdraft will always be a set amount. Depending on your bank’s offer, you might be charged interest for using it. However, most student overdrafts are interest free. Nonetheless, always check the terms and conditions before you spend.
Typical amounts for student overdrafts range from £500 to £3,000. If it is your first year using an overdraft, your limit will likely be on the lower end of the scale.
Your overdraft lets you spend money, even when your account balance is overdrawn. However, that doesn't mean it's free money to spend. You will need to pay it (and potentially interest charges) back.
Here are some additional tips for using your overdraft wisely:
All leading UK banks offer student accounts, so you need to contrast and compare the options before making a final decision. Your current bank might not have the best overdraft for students. Always look at different options, even if your family is loyal to the brand!
Some student account to consider include:
Each brand offers slightly different terms, and some even give you around £100 for free for choosing their service.
Need help deciding? Comparison websites are an excellent way to navigate the many options available.
Using a student bank account with an overdraft is a helpful way to navigate finances as a student. However, you must always remember that you will have to pay the borrowed funds back and going past the overdraft limit will result in big fees.
Keep reading about overdrafts on our main overdraft guide.
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