The way you bank as a student can make budgeting effortless, and could even earn you extra money - here's how to make the most of what's on offer
1. Don't just stick with your current bank
All the high street banks offer dedicated student bank accounts, so it's worth shopping around. Choosing wisely can help you:
- make money from interest on the cash you store in your account
- save money with freebies and discounts
- pay less for borrowing in an emergency or if you overspend.
You don't have to have a student account - you can have funding or wages paid into any current account, as well as pay for purchases or set up recurring payments for bills. Whichever you go for, regularly compare offers, and switch bank if you need to, to stay on the best deals.
2. An overdraft (usually) beats freebies
Having an overdraft in place means the bank won't charge you fees if you overspend. With a student account you won't pay to get an overdraft, and the money you borrow won't accumulate interest (some regular accounts charge for both of these).
If you don't have savings or family support, a student overdraft means money to fall back on, plus you may save more on fees and interest over the length of your course than you'll make from account freebies like railcards and gift vouchers.
If you don't need the money immediately, you could even transfer your overdraft amount to a high-interest savings account instead. 'Stoozing', as it's known, can be profitable, but only works if you're always on top of your money.
Either way, you'll only benefit from an overdraft if you stick to the terms, like not spending more than the limit, and repaying what you borrow on time. Plan ahead and stay disciplined.
3. Have more than one bank account
Student accounts come with pretty good extras so, unsurprisingly, you can only have one at a time. That doesn't mean you can't have other bank accounts - and sometimes, it makes sense to spread your money around. You could:
- store your student loan and wages in one account, then transfer money each month to a separate account for paying bills and direct debits
- load a pre-payment card with your weekly or monthly spending allowance so you always stay on budget
- keep your savings with another bank entirely if it offers better interest rates or cash bonuses.
As long as you meet the account conditions, there's no reason you can't mix-and-match banks. Use multiple accounts to avoid overspending, be more organised, and to keep hold of more money for longer.
4. Use lazy saving to stockpile cash
This is a really easy way to save for holidays, emergencies or anything else you might need cash for in the future. You don't need to put money in a jar or give up treats: your bank or savings app does it all automatically - it's pain-free saving.
First check your bank's website or app for an auto-saving, round-up or save-the-change function. After you switch it on, whenever you pay for something with your debit card, the amount is rounded up to the nearest pound and the extra few pennies moved into a savings or side account.
Giving your savings a nickname is a great idea: remembering you're saving up for 'Greece' or 'brake pads' makes it easier to leave the cash alone.
If your bank doesn't do lazy saving, shop around for one that does. A growing number of digital banks and independent apps offer auto-savings functions which securely plug into existing accounts.
5. Use credit cards for rewards, not splurging
If you think credit is buying stuff you can't afford, then stop. Using credit to spend more than you have isn't a sound strategy, and should only be used for emergencies and when it's the cheapest way for you to borrow.
That said, there are times when credit can leave you better off:
- If you buy an item that costs over £100, putting even part of the cost on your credit card gets you Section 77 protection. You can then claim a refund from the credit card company if you have problems with the seller.
- 0% credit cards are a bit like student overdrafts: you won't have to pay interest on the money you borrow.
- Some cards give cashback on spending. Putting all your purchases on one card can net a decent refund at the end of the year.
The only way to benefit from credit cards is to stick to the conditions, especially for repaying. Any time you spend on your card, put that amount aside in a savings account ready to settle up in full each month. Once you start paying for credit (through interest, fees or penalty charges), it effectively means your purchases cost more.
There are loads more banking gadgets and products you could add to the mix, such as apps that let you manage all your accounts from one place or easily split bills with friends. Get the basics under your belt first, though: these tips can make you better off now and for a long time to come.