If you're coming to university having just left school, then managing your money and having a bank account might be a new thing for you. But, even if you are a mature student, the world of student banking can be a bit different to what you may have been used to in the past. These banking basics will help you understand the world of banking and get the most out of it while you study.
Get the right account
If you're coming to university this year, then you're going to need a bank account. Most banks offer current accounts (for everyday banking) to anyone, but what you can do with them and what they can do for you can change once you become a student.
What is a student account?
Student accounts are bank accounts made for those in higher education. Like normal bank accounts, you can pay money in and take it out, but there are usually additional benefits such as interest-free overdrafts. You’ll get a debit card, which allows you to pay for things in shops and online without the need to withdraw cash.
Beware of freebies...
Banks want you and will do (almost) anything to get your business. It’s very common for people to remain with the same bank for their entire life, which makes it very important for banks to get your custom now, and they will offer any number of freebies and perks to get you to open your account with them. These range from free railcards to gig tickets, but try not to be enticed, unless the offer is something that will genuinely save you money.
What is an overdraft?
An overdraft allows you spend more than you have in your account, up to a certain limit. Overdrafts usually cost, in the form of interest, but many student accounts provide a set level of overdraft on an interest-free basis, for the duration of your course, which is the main perk for getting a student account in the first place.
Remember – the bank is just lending you this money. It will need to be paid back, so don’t get too comfortable.
You should be sure to know how long your bank will allow you to keep your interest-free overdraft. This will help you plan for paying it back before they start charging interest, which can be as much as £1 per day.
5 top tips for picking your bank account
- Get the biggest 0% overdraft: Most students need an overdraft and it’s usually the cheapest way to get money after your student funding. Having an overdraft doesn’t mean you have to use it, but it does offer a little help if you are struggling.
- Never go over your overdraft limit: This rule applies to everybody, not just students! If you go beyond your overdraft limit you will get charged. Always know what you have available in your account to avoid going over the limit, and always ask for help should you anticipate a problem.
- You will be credit checked when you apply to borrow money: Whether it’s an overdraft, credit or store card, the bank will run a credit check to see if you meet their criteria. A credit check looks at your past financial habits. If you don’t meet their criteria, you may be turned down.
- Don't pick a bank because it has a branch close to you: You can withdraw cash free of charge from any banks ATM and almost any bank gives online access so it doesn’t matter which bank has the closest branch.
- After uni, switch to a new account: Most accounts allow you to access interest free overdrafts for a year after graduating. You can then pay this off gradually. Just remember not to build your overdraft to a level that you will struggle to repay.
Banking jargon buster
Debit Card is the handy bit of plastic that you use instead of cash. The money comes straight out of your bank account.
Credit Card is a very different bit of plastic that uses money that you have borrowed to pay for items. You get charged interest each month and will need to remember to pay the bill.
Direct Debit is a way to pay for a regular bill without you having to think about it. Companies take the money you owe them on an agreed date. The amount can vary though, so you will still need to keep track of your account balance to ensure you have enough available to pay the bill.
Standing Order is similar to a direct debit but the amount does not vary.
Be a savvy saver
The best way to avoid being caught out with no money is to always have a small emergency fund that you can dip into when you need it. You can do this with a piggy bank, proudly displayed on the mantelpiece (or desk!), or you could be a bit more high tech and open a savings account in your bank. If you do internet banking (a must in this technological age!), it becomes really easy to transfer money between your current and savings accounts. Consider Save the change schemes - debit card purchases are rounded to the nearest pound and the differenct automatically gets paid into a nominated savings account (participating banks only).