An overdraft will be your buffer

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Before you go to uni, it’s a good idea to get a student bank account. These are simply bank accounts made for those in higher education. They let you pay money in and out, and offer additional benefits such as an interest-free overdraft.

Usually, to be accepted for a student bank account, you'll need a UCAS Confirmation letter with an unconditional offer, or, if your offer's conditional, you'll need to have A level results that meet the conditions. As soon as you've got these, you can open an account (you'll be credit checked), allowing you extra time to make full use of its benefits before the start of your studies.

When choosing a student bank account, aim to get the biggest and longest 0% overdraft you can. An overdraft is where the bank lets you spend more than you've got (at no extra cost), up to a set amount. Often banks charge hefty fees and interest for the privilege, but student account overdrafts are interest-free. Debt is never a good thing, but a student bank account overdraft is an excellent buffer to keep up your sleeve, in case of emergencies.

The only time getting the longest 0% overdraft doesn't apply is if any freebie on offer is more valuable to you. Many banks offer students freebies or perks to try to get them to sign up. For instance, if you know you're going to do a lot of train travel, picking an account with a free railcard may trump an account with the biggest 0% overdraft. Just don't be enticed in solely by the freebie.

For help selecting the best student bank account for you, see MoneySavingExperts guide to student bank accounts. When choosing your bank, be wary of any offering bigger overdrafts than the top picks in the guide. Some will give a guaranteed amount – if you're accepted for an overdraft – while others give 'up to' amounts, where you could be offered less than the maximum advertised. Always make sure you're comparing like for like.

It's also worth noting that many student bank accounts offer tiered overdraft amounts, which increase with each year of study, so you could end up with a bigger overdraft limit after your first year.

While 0% overdrafts are useful and should help with cash flow issues while you're a student, they're never part of your income. Always remember, an overdraft is a LOAN and must be repaid (its rate will jump eventually after you've graduated).


Three things to remember when opening a bank account

  1. Never go over your AGREED overdraft limit. This isn't a rule for students, it's a rule for life. The game totally changes if you go beyond your agreed overdraft limit – charges shoot up and you can be caught in a vicious cycle that's tough to escape from. If you stay within your limit, there's usually no cost.
  2. Don't fall for the hard sell. When you open an account, the bank may try to sell you other products, such as credit cards (even though there are strict rules in place to make sure you're not mis-sold a product). Don't be tempted. Just because you pass the bank's affordability checks to get one, doesn't mean you should take it.
  3. After uni, switch to a top graduate account. It may seem a long way off, but this is an important one. After uni, your bank will usually convert your student account into a graduate account for you, as you're no longer studying. Unless you're already with a bank offering a top-pick graduate account, you'll need to switch.

If you're already overdrawn from your existing student account, look for an account with the biggest and longest-lasting interest-free overdraft. If you're applying to a new bank, be aware that you'll need to pass another credit check to get the account (and overdraft).

These accounts aren't about borrowing more. The aim is that by not paying interest, more of your money goes towards clearing your actual debts. You'll have to pay off the overdraft eventually, usually after two or three years. The way banks try to encourage this is to reduce the maximum 0% overdraft each year – the idea being that by the time the 0% ends, you'll have paid it off.

Fail to do so, and you'll be subject to astronomical charges and fees. For a £2,000 overdraft which reduces gradually over three years, repayments would need to be at least £56 a month. In other words, at the end of each month, your total overdraft should be £56 less than the previous month. For more on the best accounts after uni, see MoneySavingExpert’s guide on graduate accounts.