Best student current accounts in 2020 for freebies and large

Despite the coronavirus pandemic throwing cold water on fresher’s week and an A-level results day fiasco which initially saw close to 40 per cent of grades marked down, thousands of students are set to start university next month.

And even if close to 20,000 students will defer their entry until next September, many will still be packing their bags and managing their money for the first time.

Every year Britain’s biggest banks seek to sign-up freshers with large overdrafts and freebies, and this year is no different, even if most other things have been.

Students in Cheltenham collect their A-level results earlier this month

Students in Cheltenham collect their A-level results earlier this month

Students in Cheltenham collect their A-level results earlier this month  

The benefit to banks is the hope of keeping a future earning graduate as a customer for decades to come.  

This is Money has picked out some of the best options for those heading to university next month.

This includes the best overdrafts for beating recent hikes from most major banks and perks that can make an account more appealing.

NatWest has one of the most well-rounded student bank account offers on the market, including a decent overdraft buffer, but at the heart of it is the choice of one of three free perks.

Applicants can choose between a 12-month Amazon Prime Student membership and a £10 gift card at the retailer, a four-year Tastecard subscription or a National Express Coachcard which also lasts for four years.

Amazon Prime Student can already be had for six months for free, but the extra six months would save a student around £24, plus the £10 from the gift card.

The four-year Coachcard offers one-third off standard and flexible coach fares, a three-year card would cost £30 and a one-year card £12.50, making it worth £42.50 prior to any savings obtained through using it.

But the biggest upfront saving is from the Tastecard, which is usually worth £35 a year. It provides 50 per cent off or two for one meals at ‘thousands of restaurants’, up to 40 per cent off cinema tickets, 33 per cent off film rentals from streaming service Rakuten TV.

Overdraft wise, the bank provides an interest-free buffer of £500 for a student’s first term, and up to £2,000 after that if they apply and are accepted.

Sign-up requirements: In order to be accepted for an overdraft account holders must be 18 and have lived in the UK for three years, for the account itself they must be 17, be living in the UK, and completing an undergraduate course of at least two years.

Watch out: Bank arranged overdraft rates have become higher since last September

While NatWest doesn’t charge student borrowers its new overdraft rate of 39.49 per cent, the first year after they graduate their interest-free buffer will shrink from £2,000 to £1,000.

While they can still borrow up to that much, anyone who goes beyond £1,000 will be charged 39.49 per cent, making it crucial for students to clear their borrowing after they leave.

Watch out for overdraft trap 

While many banks will simply block students from exceeding their interest-free buffer, some will charge student borrowers overdraft rates of close to 40 per cent if they borrow too much.

Halifax and Lloyds offer interest-free overdrafts of up to £1,500 and £2,000, respectively, but if students exceed those amounts, they will be charged 39.9 per cent.

TSB, which itself offers a fee-free overdraft of up to £1,500, will charge the same if students exceed that. Its account pays 5 per cent interest on balances of up to £500, so it may be better aimed at those who don’t plan on using their overdraft regularly, as higher interest-free overdrafts can be found elsewhere.

And it is worth noting banks will not necessarily give applicants the maximum fee-free overdraft they advertise on their websites, their limit can often be based on their credit score. Students should check their score before they apply, it is free to do so, and try and improve it if they can. 

If students don’t have any other borrowing, they can try and give their score a boost in other ways, such as by registering to vote, or ensuring they’re up to date on something like a mobile phone contract.

Probably the best account on the market for overdrafts by the end of a three-year university course, customers of Nationwide can get up to £3,000 interest-free by their third year, provided they request an increase every year.

The buffer is £1,000 in year one and £2,000 in year two, and unlike some other accounts students will get the full amount if they are accepted for an overdraft, rather than a potentially lower limit.

However, account holders will need to pay in £500 a term to remain eligible for the overdraft, although student loans count towards this.

Sign-up requirements: Applicants must be 18 or over, must not have a student account with another bank, and must have been accepted onto a full-time UCAS course at a UK institution which lasts at least two years.

Watch out: Aside from the interest-free overdraft of up to £3,000 by year three, the account doesn’t come with any other perks. It did pay 1 per cent interest on up to £1,000 last year, but this has been scrapped.

Some of the best student bank accounts out there and what they offer you
Bank account Fee-free overdraft limit  In-credit interest  Freebies
Santander 123 Student Account £1,500 in Year 1 – 3 (initially £250)
£1,800 in Year 4
£2,000 in Year 5
1% on up to £2,000 4-year 16-25 railcard 
NatWest/RBS Student Account   £2,000 after the first term (£500 before that)  N/A  Choice of:
– Free 1-year Amazon Prime student membership plus £10 Amazon voucher
– 4-year Tastecard
– 4-year National Express Coachcard
Nationwide FlexStudent Account  £1,000 in Year 1 
£2,000 in Year 2
£3,000 in Year 3 
N/A  N/A
HSBC Student Bank Account  £1,000 in Year 1
£2,000 in Year 2
£3,000 in Year 3
N/A  N/A 
Barclays Student Additions Account  £1,000 in Year after the first term (£500 before that)
£2,000 in Year 2
£3,000 in Year 3
N/A  12-month subscription to the eBook service Perlego 
Source: This is Money/Moneycomms

Santander’s student offering has long been touted as one of the best around, with the biggest perk a free four-year railcard, usually costing around £100, giving one-third off rail fares for an estimated saving of around £199.

It also offers in-credit interest for students who keep their balance positive, although this is less generous than it was last year. 

It pays 1 per cent interest on balances of up to £2,000, having last year paid a tiered rate of up to 3 per cent on the same sum.

For those students likelier to be in the red than in the black, the bank offers an interest-free overdraft of up to £1,500 in years one to three, £1,800 in year four and £2,000 in year five.

Santander's 123 Student account has long been seen as one of the best offers around, with a free four-year 16-25 Railcard thrown in, even if the bank cut its interest offer this year

Santander's 123 Student account has long been seen as one of the best offers around, with a free four-year 16-25 Railcard thrown in, even if the bank cut its interest offer this year

Santander’s 123 Student account has long been seen as one of the best offers around, with a free four-year 16-25 Railcard thrown in, even if the bank cut its interest offer this year

The fee-free buffer starts at £250, and in order to up it to £1,500 account holders must register for online banking and pay in £500 and then a further £500 each academic term.

For the first two years after graduation, students will be transferred to a 123 Graduate account which provides an interest-free overdraft buffer of up to £2,000, provided graduates use it as their main account and pay their salary into it.

Sign-up requirements: Applicants must be 18 or over, live in the UK, and have a confirmed place on an undergraduate course or level 4-7 apprenticeship of at least two years in length.

Smartphone banks have signed up millions of younger customers through intuitive apps, but neither offer a dedicated student account, meaning borrowing could be expensive

Smartphone banks have signed up millions of younger customers through intuitive apps, but neither offer a dedicated student account, meaning borrowing could be expensive

Smartphone banks have signed up millions of younger customers through intuitive apps, but neither offer a dedicated student account, meaning borrowing could be expensive  

What about the digital banks?

Smartphone banks Monzo and Starling have snapped up millions of young customers who are used to banking solely on their mobiles with no need for branches, or even online banking.

While students may be attracted to them as money management services to help keep track of their incomings and outgoings, it is worth noting neither bank offers a dedicated student account, although Monzo offers accounts open to 16 and 17-year-olds.

That means they don’t offer the same sizeable interest-free overdrafts as some of the accounts mentioned above, meaning that if someone plans on using their overdraft frequently it could get expensive.

Starling charges between 15 per cent and 35 per cent depending on a customer’s credit score, and Monzo between 19 per cent and 39 per cent.


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