There is a lot to consider when choosing the right bank account. For example, do you need an overdraft, which banks are accessible, what should you be looking for from a bank?
What is an overdraft?
Overdrafts are loans from the bank where you can draw more money from your account than you have in there. There are two types of overdraft: arranged and unarranged.
Arranged overdraft: is pre-agreed with your bank. You can borrow without being charged fees, at a set rate of interest, often 0% for students. Depending on your credit history, you may be able to get an overdraft up to £3000.
Unarranged overdrafts: are unplanned, they haven’t been agreed by the bank. You will be charged a high fee and interest rate for using this.
Both retail and challenger banks may offer overdrafts to their customers who are over 18-years old. You may have to request an overdraft from your bank. Student-specific bank accounts often offer higher overdraft limits at lower interest rates.
Remember…an overdraft isn’t free money, the bank can cancel it at any time. You will be charged if you go over the limit, which could negatively impact your credit rating. And, you will have to pay the money back!
Paying off your student overdraft
After graduating, if you have a student account, you’ll be eligible for a graduate bank account. Your overdraft limit will decrease over time, so it is important to check repayment conditions.
Graduate accounts are similar to standard current accounts, but banks often add in extra benefits, e.g., bigger overdrafts and lower interest rates on borrowing. If you have a standard account from a bank, it is less likely graduating will affect your overdraft limit.
You do not need to stay at the same bank for your student and graduate account. Shop around to get a good deal!
Incentives on student accounts
Banks can offer incentives to entice you to bank with them, they can include railcards for discounted travel, student discount cards and mobile phone insurance. Shop around, there are some great incentives banks have to offer when opening a student account.
Finally, check out this helpful audio video where Becky from MyBnk discusses how banking works and guidance you may need when applying to one.
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