Banking for Students Under 18

Most UK Banks offer specialist banking for students under 18; with the majority of them guaranteeing an interest-free overdraft until studies are completed. Some have a limited overdraft and others offer much higher amounts; so as with anything else it is wise to shop around. Take careful note of the wording, as while some banks offer guaranteed overdraft amounts; others will list up to a certain amount, and if you’re not careful you could end up with hefty charges.

Whatever the set overdraft limit, do not ever exceed that amount whether you are paying interest or not; as even when you are paying interest on your overdraft the charges will increase dramatically if you break the limit. If you have an emergency and need extra funds, you should talk to your bank about an extension or any other options that may be open to you.

Exceeding your limit could cost you 25% interest, or a fixed charge on every transaction made beyond the limit: i.e. going over by £30 in three different transactions could end up costing you an extra £75 if the transaction fee is £25.

Opening a bank account will mean that you will have your credit history checked and as a student you probably have no score yet, and most banks take this into consideration with their special accounts for students under 18. However, the way you use your bank accounts and overdraft facility will make its mark on your credit rating, which will affect you in the future so take great care.

After graduating this type of account no longer applies and you will need to open a different account which will have various perks and drawbacks, so again it is important to study the conditions carefully before choosing where to go next. Many banks offer a top graduate account for a year or more after graduation; which will still give you the opportunity of interest-free overdraft, as well as a payment plan to eventually clear the debt.

Any overdraft should be used with caution and only when absolutely necessary, as most students already have their student loans to pay off once they graduate, and making use of an overdraft is only adding to your debts.

Student bank accounts that have special dispensations like interest-free overdraft will not pay any interest on accumulated savings, so if you are lucky enough to be able to save money on a regular basis, it is advisable to open a separate savings account where your money will earn interest.