While freebies like cash, gig tickets and car insurance are designed to be enticing, if you don’t manage a student bank account well you may end up paying more in penalty charges than they’re worth.
Student bank accounts are designed to help you through your studies: you’ll likely get a debit card (for access to your own money) and an overdraft facility (for access to the bank’s). If you’re going to avoid stress, sleepless nights and sobbing in front of your bank manager, you’ll want to learn how to work both like a pro.
Shop around to see how student accounts stack up between banks, and balance the cost of any freebies and reward points against interest rates and charges.
Choosing a bank with a campus branch might be useful, but you can withdraw cash for free from most ATMs (avoid those cornershop machines that charge) and most accounts can be managed online or by (smart) phone.
This is the deal-maker for student accounts, as you’ll likely have times when you need emergency cash.
If your account comes with a £500 overdraft, you can spend your existing balance plus up to £500 of the bank’s money. Any money you pay into your account once you’ve dipped into your overdraft pays off your negative balance first. Shop around for a 0% interest overdraft without fees.
Overdrafts are borrowed money: you may need to pass a credit check to get one or get the best deals (see Credit Scoring). Keep in mind that your student overdraft allowance may be lower in year one and gradually increase. The reverse is true of a graduate overdraft, which starts higher and tails off (to help nudge you towards clearing your debts).
While you can’t beat 0% for borrowing – a privilege reserved for student accounts – it will eventually need to be repaid. Any overdrawn balance you carry over to a regular current account later will start to accrue interest charges and, like any debt, if you don’t keep on top of things, it can get harder and harder to pay back: plan ahead!
Cheques: Useful for paying deposits or bills. You’ll need to keep enough money in your account until the payment clears (which could take a couple of days) or risk penalty charges for bounced (unpaid) cheques.
Contactless cards: Rather than entering your pin, you hold your card in front of a card reader – usually limited to around £30 per spend. Some banks are introducing a similar set-up for paying by phone (touch your handset to the terminal instead).
Mobile payments: Paym (“pay ‘em”) is a way of sending and receiving money using mobile phone numbers: handy for paying your share of the gas bill or getting an emergency tenner from your big sis. You’ll need your bank’s smartphone app to send money, but anyone with a suitable mobile phone should be able to register to receive payments (cash is paid into/out of your bank account). Check if your bank offers it and whether it caps payments to help combat fraud.
Be savvy, stay safe
Never share your pin with anyone – even with the bank – and always shield the keypad when you use a card machine or ATM. If you pay online, check the site is secure (look for the padlock in the address bar) and consider using a service such as PayPal (paypal.co.uk), which uses a password rather than your card details to pay for stuff.
Check your statements carefully and tell your bank if anything seems unusual. Definitely tell them asap if your cards are lost or stolen so they can put a block on them. Don’t be completely seduced by the latest technology – while it makes life easier, it also makes spending easier, too.
Read this piece and much, much more in our Student Money Manual which is also available as a digital download on our website!