Choosing a Bank Account

If you’re thinking of opening a new bank account, read our guide before you choose one!
Don’t just be tempted by the best freebies or the size of the fee-free overdraft; whilst these can be a welcome bonus, there are more important factors to consider, to help you to manage your money conveniently and cost-effectively.

If you are off to university or college, you will probably want to open a Student Bank Account, which offers various benefits such as an interest-free overdraft facility. Once you have completed your studies, you should look at Graduate or Young Person’s Accounts, to take advantage of preferential terms. Or perhaps your financial situation has changed, or you are just dissatisfied with the service provided by your current bank.

Whatever your reasons for opening a new account, read our guide of points to watch, things to consider and features to compare, to help you choose the bank and type of account that’s right for you, during student life and beyond.

Starting out
How to start & points to watch

Things to Consider 
Understand the differences between accounts & how to choose one to suit your financial situation

Compare Accounts 
Resources for comparing accounts – for students, graduates & standard current accounts 

How to switch from an existing account 


Starting out

While many of us bank with the Big Four – Barclays, Halifax/Lloyds, HSBC, RBS/NatWest, there’s a huge choice beyond this e.g. First Direct, Santander, Nationwide, Metro Bank, Monzo…
Banks and building societies offer a range of current accounts with different deals and benefits: think about your personal financial situation, what you most need from a bank account, and how you plan to use it.

Arrange to talk to an adviser and allow plenty of time.Bank Account - worried grad outside bank
Banks recognise this is new territory for many young people – don’t be afraid to ask questions and do query anything you don’t understand.
Be aware of banks’ sales culture.  Don’t feel pressurised into making an instant decision.  Take time to think things over, shop around and compare options from several institutions.

Make sure you understand the terms and conditions of an account before you commit  e.g. if you are offered an interest-free overdraft, check how long it would remain interest-free, when the overdraft limit might be reduced, what rates and charges apply if you go over your limit etc.

Things to Consider


What do You Need from an Account?

Explain your personal situation in terms of employment, debts, spending, savings etc. A bank should match the product to your individual needs.

If you are overdrawn on your existing student account

Look for a bank that offers a large interest-free overdraft for the longest period, to help you clear your debts.  But be aware of the consequences of exceeding the arranged overdraft limit!
Aim to gradually reduce your overdraft, so that you clear it before interest charges and fees apply.

If you are earning and likely to remain in credit

Look for an account that pays high interest.   That might mean opting for a basic current account rather than a Graduate one. But beware that going overdrawn on this sort of account will usually cost you more.
Savings full piggy -cropped- wb

If you are earning enough to save regularly

Rather than leaving your money in a current account, you could probably earn more interest by opening a savings account.

Standard or Packaged Account

Most current accounts are available as a standard or ‘packaged’ account, which offers extra features – usually for a fee; you pay a monthly charge for benefits such as car breakdown cover and insurance e.g. mobile phone and travel.

Compare packaged accounts to the standard no-frills ones.  Price up the benefits you need, and check whether it would be cheaper to opt for a standard account, buying the extras as and when required, and whether you could get them cheaper elsewhere.

Fees & Charges

What are the fees involved?
Look out for high charges on overdrafts and other services.

Interest Rates

For borrowing money:
Do they offer interest-free overdrafts or preferential interest rates on loans?

For bank accounts in credit and for savings:
If your account is normally in credit, or you can start saving, look for higher interest rates to help maximise your earnings.

Find out more:

Understand Interest Rates


Introductory Incentives

Many banks offer cash incentives or competitive introductory interest rates to attract new customers; but do look beyond any short-term deal, to check that the account would still be the right one for you once the offer ends.

Service & Access

How does the bank treat students/graduates/young people?

Were they helpful in answering your questions and finding a product to meet your particular needs?


How do you want to deal with your bank?

  • If you prefer personal contact through a branch, look for a bank with good High Street presence. Do they offer a personal banking service, with dedicated advisers who get to know their clients?
  • If personal contact isn’t a priority, you might prefer the convenience of mobile banking and internet-only accounts, which often offer the best rates.Mobile Banking Man - wb


How easy is it to access your account?

  • Make sure there’s a local cashpoint machine that you can use free of charge, to avoid cash withdrawal charges.
  • How does the their mobile banking measure up – via app, web or phone? What banking features do they offer e.g. budgeting facilities?


What if You Change Your Mind about an Account?

  • Ask if there’s a cooling off period.
  • Check how you get out of it – are there penalties for switching accounts?
  • Can you downgrade from a packaged account to a standard one, or cancel add-ons if your circumstances change e.g. you sell your car and no longer want breakdown cover, or you lose your job and need to reduce expenditure?  What are your options?


Find out more:

 How to Choose the Right Bank Account – Money Advice Service


Compare Accounts

Once you know the key criteria you want from an account, explore various options from different institutions. Comparison sites are a good starting point: search the top Graduate Accounts, the best in-credit or for overdrafts, or packaged accounts etc.

Compare Graduate AccountsGraduate piggy - wb

Specifically designed to help you gradually reduce student debt and take control of your finances, by offering preferential terms such as interest-free overdrafts.  See Graduate Accounts.

Graduate Bank Accounts – Money Saving Expert

Graduate Accounts – Which?
Graduate accounts ranked in order of the maximum free overdraft they allow


Compare Standard Current Accounts

Bank Accounts – Which?

Compare Current Accounts – uSwitch

Compare Bank Accounts – Money Saving Expert

Current Accounts – Money Supermarket

Student Loan Piggy bank

Compare Student Accounts

Look at the ‘Things to Consider‘ above for general pointers on choosing your student account.

Most students decide where to bank while at university based on what incentives are on offer, or based on the size of the fee-free overdraft. While that’s better than basing your decision on who you’ve banked with all your life – because the first rule of personal finance is that loyalty rarely pays – there is one other crucial thing to factor in: what happens if you go over your overdraft?

If you accidentally spend more than the amount arranged with your bank, which is easily done, financial penalties may be incurred. We’ve looked at the fees charged by eight banks offering student accounts, and found that only three of them won’t charge students for this. See the table below.


Student Bank Account 0% Overdraft Terms Unarranged Overdraft Terms Incentive Source
Student 123 Current Account  Year 1-3: £1,500
Year 4: £1,800
Year 5: £2,000
£5 per day, capped at 10 days in each monthly statement

£5 fee for allowing a payment despite funds, £10 for refusing a payment despite lack of funds

4 year railcard + Monthly interest of 3% AER/2.96% gross (variable) on balances from £300 up to a maximum of £2,000

1|2|3 world offers and 15% off certain retailers

HSBC Student Account 

Year 1: £1,000
Year 2: £2,000
Year 3: £3,000

Unarranged overdraft fees are ‘not applicable’ to students accounts.

First year students get £100 when opening account.

12 months British Cycling Fan Membership

A series of student discounts on restaurants, shops and cinema vouchers


Source 1


Source 2

Natwest Student Account  May apply for a £500 overdraft in first term and up to £2,000 any time after the first term. 

Must deposit £750 every 3 months.

Charges students for unpaid transaction fees: £8

1 fee per charging period.

Choice between:

1yr Amazon Prime Student & £10 Amazon Gift Card

National Express Coachcard (1/3 off fares), valid for 4 yrs

TasteCard (2for1 or 50% off in participating restaurants), valid for 4 yrs

Source 1

Source 2 

Nationwide FlexStudent  Year 1: Up to £1,000
Year 2: Up to £2,000
Year 3: Up to £3,000

All on request Must pay in £500 per term and show “good account behaviour”

There are no fees: “The UK’s only fee-free account”

Receive 1% AER/gross p.a. (variable) on balances up to £1,000.

Source 1


Source 2

Barclays Student Additions  Account opening: up to £500
Year 1: up to £1,000
Year 2: up to £2,000
Year 3 and beyond: up to £3,000

Subject to application, status and lending criteria.

No fee for allowing a payment despite lack of funds

£8 a day unpaid transaction fee capped at £32 per month (4 charges per month)

Will charge £5 per day, 7 charges a month, for emergency borrowing fees within arranged overdraft.

Selected cashback offers with participating retailers

Source 1 

Source 2

RBS Student Current Account  May apply for a £500 overdraft in first term and up to £2,000 any time after the first term.

Must deposit £750 every 3 months

Charges students for unpaid transaction fees: £8

1 fee per charging period.

Choice between:

1yr Amazon Prime Student & £10 Amazon Gift Card

National Express Coachcard (1/3 off fares), valid for 4 yrs

TasteCard (2for1 or 50% off in participating restaurants), valid for 4 yrs

Source 1

Source 2 

Lloyds Student Account  In your first year, you can apply for a planned overdraft where there is an interest and fee-free amount of up to:

£500 for the first 6 months from account opening,

£1,000 from month 7 from account opening,

£1,500 from month 10 from account opening.

In your second and third year, your planned overdraft can be up to £1,500

In your fourth year and above, your planned overdraft can be up to £2,000

If a payment takes you over your limit or we refuse it, you won’t be charged.

The daily arranged overdraft fee is 1p for every full £6 you borrow up to £1,250, 1p for every further full £7 you borrow between £1,250 and £2,500, and then a further 1p for every full £8 you borrow over £2,500.

TOTUM card. (Previously NUS extra).

Free ISIC card and discounts on 200 UK stores

Up to 15% cashback with Everyday Offers at certain retailers.

‘It’s On Us’ bonus.

Every month, we pay customers for something they’ve bought up to the value of £500 on their Lloyds Bank debit or credit card. Enter the ‘free draw’ to get access.

Source 1 

Source 2 

Halifax Student Current Account  A fee-free arranged overdraft up to £1,500 for the length of your course plus an extra year after you graduate, up to a maximum of 6 years. (Overdrafts are repayable on demand and subject to status) No fees. “So all your payments are made, it’s important you manage your account within your planned overdraft limit. If you don’t have enough money in your account or you reach your limit, you may not be able to make any more payments. If a payment takes you over your limit or we stop it, you won’t be charged.

“This could mean your mortgage or rent and other commitments may not be paid. Some suppliers may charge you fees for missing those payments.”

Credit interest on any credit balance 0.10% AER (0.10% gross) variable. Interest is paid monthly

Cashback when you spend once registered for Online Banking and you’ve activated Cashback Extras

Eligible account for Save the Change®.


Source 1 


Source 2

TSB Student Account   Months 0-6: up to £510
Months 7-9: Up to £1,010
Thereafter: up to £1,510


Must apply to receive increase

If you try to make a payment and you don’t have enough money in your account (including your Arranged Overdraft if you have one), we’ll treat this as a request for an Unarranged Overdraft. If it’s authorised and you use £10 or less, you won’t be charged fees or interest on the amount you’ve borrowed. If you use more than £10 you’ll get charged interest and fees on the full amount.

£6 monthly usage fee
Under £10: no charge
£10-£25: £5 a day
£25+: £10 a day

Interest on the whole amount.

Returned Item Fee of £10 per item (max 3 per day)

Max £80per month for all fees
8 maximum fees a month

Receive 5% AER /4.89% gross variable interest on balances up to £500, paid by the 10th working day of each month


Source 1


Source 2 

Source: Information collated from bank websites by, correct on 8th August 2019

Many students will have accounts with challenger banks like Monzo and Revolut, supported by mobile apps featuring handy functions for budgeting and splitting bills. However, these don’t offer fee-free overdrafts, even to students, so for those needing arranged overdrafts it’s worth using these alongside dedicated student current accounts.


Banks used to work on inertia – the fact that once you were in, you were unlikely to change banks because of the hassle involved.  But thanks to a change in banking laws, you can switch quickly and easily (within 7 days), using a bank’s switching service. As a result, financial institutions are becoming more competitive, so if you’re not happy with your bank, be proactive and look around for better deals and service.

Find out more:

Switching Your Bank Account – Which?

The Current Account Switch Service
How it works; most UK banks & building societies are signed up to the service, so the process will be the same wherever you switch



Mobile Banking right arrow