One of the biggest learning lessons of going to university is managing your money on a tight budget. An overdraft can help to give you some breathing space, which is why it’s important to find the best student account with overdrafts. We break down everything you need to know, including which accounts – like the NatWest Student bank account – have the best overdrafts available.
Which banks offer the best overdrafts for students?
When you start to compare student bank accounts, you’ll find that they all offer some sort of interest-free overdraft. However, how much this is and when you can apply for more depends on the bank. Let’s take a look at how the major UK banks stack up when looking at a 3-year course.
Provider
Year 1
Year 2
Year 3
NatWest
Up to £500 when you first open your student account
Up to £2,000 from your second term in your first year
Up to £2,000
Up to £3,250
RBS
Up to £500 when you first open your student account
Up to £2,000 from your second term in your first year
Up to £2,000
Up to £3,250
Santander
Up to £1,500
Up to £1,500
Up to £1,500
Nationwide
Up to £1,000
Up to £2,000
Up to £3,000
Lloyds
Up to £1,500
Up to £1,500
Up to £1,500
HSBC
Up to £1,000
Up to £2,000
Up to £3,000
Barclays
Up to £500 in your first term
Up to £1,000 from your second term in your first year
Up to £1,500
Up to £1,500
NatWest’s Student bank account is the best overall for overdrafts as you can apply to increase the limit to £3,250 from year 3 onwards (including after graduation). Nationwide is a close second, with its overdraft increasing to £3,000 by year 3.
How do you apply for an overdraft?
In order to apply for a student overdraft, you first need to open a student bank account. It’s important to note that overdrafts aren’t provided automatically; it’s something you will need to apply for either when you’re opening your account or shortly afterwards. Here’s a step-by-step guide:
Apply for a student bank account, typically online or through the bank’s mobile banking app.
Provide the correct documentation, including your 16-digit UCAS code, UK passport or driver’s licence and proof of address.
Either during the application process or shortly afterwards, apply for an overdraft. If it’s an account like the NatWest Student bank account or Barclays Student Additions account, you’ll be given an initial limit of £500.
If you want to increase your overdraft limit, you’ll need to apply again. To apply for an overdraft you need to be 18+. Overdrafts are subject to status and lending criteria.
How do tiered limits work?
Typically, when you first open your student account, you’ll be given a lower overdraft limit. It’s likely to be your first time handling a large sum of money, so banks tend to build up to the higher limits.
Not all banks have tiered limits. For example, Santander and Lloyds simply offer up to £1,500 interest-free for every year of a 3-year course. Whereas, NatWest, HSBC, Nationwide and Barclays have tiered limits that you can apply to increase over the period of your course.
How to manage your first overdraft safely
It’s important to understand that, while your student overdraft is interest-free, you are still borrowing money from the bank, and it will need to be repaid before the end of your interest-free period – otherwise you could face costly interest charges.
To safely manage your first overdraft, remember that it’s there to provide a financial buffer, rather than just extra spending money. Consistently maxing out your overdraft can negatively impact your credit score.
Ensure you track the expiry date of your interest-free period and create a plan to repay the overdraft before then. Push notifications from your mobile banking app and low-balance text alerts will help you to keep an eye on your balance and whether or not you’re staying on track.
What happens after university?
Typically, once you graduate, your student account will be transferred to a graduate account. This will automatically happen within a few months of finishing university.
Your account number, sort code and debit card usually stay the same, but your student perks will end, and your interest-free overdraft will start to taper off.
Here’s how each bank reduces its interest-free overdraft over time, based on students taking a 3-year course.
Provider
First year post-graduation
Second year post-graduation
Third year post-graduation
NatWest
Up to £3,250
Up to £2,250
Up to £1,250
RBS
Up to £3,250
Up to £2,250
Up to £1,250
Santander
Up to £2,000
Up to £1,000
£0
Nationwide
Up to £2,500 at the end of year 1 after your course finishes
Up to £1,750 at the end of year 2
Up to £1,000 the end of year 3
Lloyds
Up to £2,000
Up to £1,500
Up to £1,000
HSBC
Up to £3,000
Up to £2,000
£0
Barclays
Up to £1,500
Up to £1,500
Up to £1,500
NatWest and RBS give you 3 years in which to pay off your interest-free overdraft, compared to Santander and HSBC, which only give you 2 years.
Frequently asked questions
What makes a student overdraft different from a standard bank overdraft?
The key difference with a student overdraft is that it’s interest-free, meaning you won’t be charged extra for borrowing money while you’re studying. However, it isn’t free money – you still need to repay what you owe. Be sure to clear your balance before the interest-free period ends, which is typically 2 to 3 years after graduation.
How much money can I actually borrow in my student overdraft?
This will depend on which student bank account you choose. The maximum you may be able to borrow is £3,250, and this is with the NatWest Student bank account from year 3 of your course (including after you graduate). However, this maximum is not automatically granted with the account – the limit shown is subject to lending criteria, you’ll need to apply and be approved. Your overdraft limit may be lower than the maximum.
Do student overdraft limits increase each year automatically, or do I have to request it?
No, student overdraft limits don’t automatically increase each year. Overdrafts are subject to status and lending criteria, so you’ll need to apply each time you want to take advantage of the increased limit available.
Is a student overdraft free money, or does it have to be paid back?
The money absolutely needs to be paid back. If you don’t repay your student overdraft before the end of the interest-free period, standard overdraft interest charges will apply to any balance outstanding, and these can be quite high. So, to avoid charges and any negative impact on your credit score, it’s best to pay off your overdraft before the end of your interest-free period.
Can I open more than one student bank account with an overdraft at the same time?
Generally no. Most UK banks state that you can only hold one student bank account, and some require you to pay your student loan or main income into that specified account.
What documents do I need to open a UK student bank account?
Typically, when you apply for a UK student bank account, you’ll need to provide your 16-digit UCAS code, UK passport or driver’s licence and proof of address.
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Kate Steere is an editor and money expert at Finder, specialising in banking, savings and fintech. She has previously written for The Motley Fool UK and Fitch Solutions, where she covered a wide range of personal finance topics and kept a close eye on market trends. Kate has a Bachelor of Arts in Modern History from the University of East Anglia. When not working, she can usually be found curled up with a good book or heading out for a run.
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