A guide to student and graduate bank accounts

If you’re planning to go to university or a higher education college, you’ll be entitled to a student bank account. Once you finish studying, this will normally change into a graduate bank account. Read our guide to help you make the most of this budgeting tool during and after your student life.

Current accounts

The type of bank account that you use for your everyday banking needs is called a current account. Nearly everyone can have a current account, and they usually come with some standard features:

  • Debit card/cash card
  • Internet and phone banking
  • Online or printed statements
  • Overdraft facilities
  • Ability to set up direct debits and standing orders
  • Interest on the money in the account

Student accounts

The biggest difference between current accounts and student accounts is the overdraft facility. Some student accounts allow overdrafts of up to £3,000 completely interest free. This means you don’t have to pay interest on anything within the authorised overdraft limit while you are a student. But remember this isn’t free money: after you graduate you still have to repay what you borrow.

Competition between banks and building societies is very high for students, and because of this some offer ‘freebies’ in addition to overdrafts to tempt you to open one of their accounts. A popular ‘freebie’ is a 16-25 Railcard (not available in Northern Ireland).

The overdraft limit quoted by the bank when you open an account might be an ‘up to’ amount increased only by agreement during the years that you are a student. If you go beyond your authorised overdraft limit, then expensive charges will apply. You should speak to your bank immediately if this is likely to happen, as it could hurt your credit rating and ability to borrow in the future.

Managing your budget through your student account

The majority of payments you receive and make will go through your student account. You should set and stick to a budget so that you stay within the authorised overdraft limit you have agreed with your bank.

Opening more than one student account

Some students open more than one account to take advantage of the free overdraft facilities. Using more than one account to manage your budget is an option some people use, for example paying accommodation costs from one account and using another to manage day-to-day spending. But you could run the risk of running up a lot of debt. Again, consider your credit rating.

Credit cards with student accounts

Some banks have student credit cards that are available alongside student accounts. These cards usually have fixed and relatively low credit limits. While credit cards can help you make bigger, one-off purchases to help with your studies, you should not see them as a replacement for day-to-day spending and budgeting. If you miss a repayment, even the minimum, you will incur charges and damage your credit rating.

Making payments through your student account

Online and mobile banking allow you to make payments easily if you know the account details. A new service called Paym launched in 2014 allows payments between people who have registered their mobile numbers. Your student account might offer this facility but use it with care. While it is a secure service and makes payments between friends and family easy, ensure you keep track of any payments you make so that you stay within your authorised overdraft limit.

Banking safely

Here are some tips to help you manage your account safely and prevent fraud:

  • Never keep your Personal Identification Number (PIN) with your bank cards
  • Shield your PIN at cash machines
  • If you bank online, make sure the security software on your computer, smartphone or tablet is up to date
  • Never tell anyone your online banking password or PIN
  • Try not to use shared computers or tablets to access online banking
  • Regularly check your bank statement to make sure there are no errors and all of the spending is yours

Read our guide for more tips about protecting yourself from banking scams or theft

Moving onto a graduate account

Once you leave university or college your bank will usually turn your student account into a graduate account. The main reason for this is to begin to reduce the level of overdraft that you may have built up over your time studying. These accounts still provide very generous interest-free overdrafts, but the amount of interest-free borrowing tends to reduce each year you have the account. Use this as an opportunity to rebalance your budget after you graduate.

Choosing your student or graduate account

Comparison websites are a good starting point for anyone trying to find a current account tailored to their needs.

We recommend the following websites for comparing current accounts:

Remember:

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
  • Find out more in our guide to comparison sites.