If you’ve been looking at student bank accounts then you’re probably well aware of the term ‘student overdraft’. This is where the bank lets you spend more money than you have and they vary massively depending on the account you choose. While they come with some drawbacks, overdrafts can be a great option for students who are worried about running out of cash between Student Finance payments. So, how does a student overdraft work? Read on to find out everything that you need to know.

What is an overdraft?

how does a student overdraft work
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Typically, overdrafts allow you to take more money out of your bank account than what you have. It’s essentially borrowing money from your bank, with the caveat that you’ll pay the money back with interest. Student bank accounts, however, rarely charge you interest. This is always good if you’re struggling with money and need some extra help with funds, especially during the cost-of-living crisis Britain is facing currently. To qualify for an overdraft, you’ll need proof of identification, proof of study and access to your own student bank account. So, if you’re wondering exactly how student overdrafts work, we’re here to help!

What happens if I go into my student overdraft?

how does a student overdraft work
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If you open a student bank account in your first year of University, you can expect to have an overdraft of up to £1000 (though this varies between banks). Some banks will extend this to £2000 in your second year and then £3000 for your third year. Most banks won’t charge interest on student accounts if you go into your overdraft, but this is something you should check before applying for your current account. When choosing your current account, don’t let banks draw you in with goodies like cash rewards unless you’ve read the terms and conditions and understand your interest rates first. Also, if your degree is longer than 3 years (e.g. medicine), inform your bank so they don’t switch your account to a graduate plan which charges interest on arranged overdrafts.

Best interest-free overdrafts

Santander

  • 0% interest overdraft
  • Up to £2000 overdraft
  • Free 4-year railcard for rail travel

Conditions: Must be 18 or over, living in the UK permanently, studying an undergraduate degree for at least 2 years with an unconditional/confirmed offer, must not already have a Santander current account, and must pay at least £500 per academic term.

Click the link here to sign up for a Santander student account.

NatWest

  • 0% interest overdraft
  • Up to £2000 overdraft
  • £80 cash
  • Free 4-year tastecard worth £39.99 per year

Conditions: Must be 18 or over, a UK citizen/lived in the UK for at least 3 years, a full-time undergraduate student on a course that is at least 2 years, or a postgraduate student.

Click the link here to sign up for a Natwest student account.

HSBC Student Bank Account

  • 0% interest overdraft
  • Up to £3000 overdraft
  • £100 cash

Conditions: Must be 18 or over, and have a confirmed place at a qualifying UK University/college.

Click the link here to sign up for an HSBC student account.

Nationwide Flex Student

  • 0% interest overdraft
  • Up to £3000 overdraft
  • £100 cash

Conditions: Must be 18 or over, a UK citizen/lived in the UK for at least 3 years, a full-time undergraduate student on a course that is at least 2 years, must pay in at least £500 by December 16th 2022, must not have had a FlexStudent or FlexGraduate account on July 31st 2022.

Click here to sign up for a Nationwide student account.

Halifax Student Current Account

  • 0% interest overdraft
  • Up to £1500 overdraft
  • 0.10% in-credit interest

Conditions: Must be 18 or over, and have a confirmed place at a qualifying UK University/college.

Click here to sign up for a Halifax student account.

Barclays Student Additions

  • 0% interest overdraft
  • Up to £1500 overdraft
  • 12-month Perlego subscription

Conditions: Must be 18 or over, and have a confirmed place at a qualifying UK University/college, must apply before November 30th 2022 to be eligible for the Perlego subscription.

Click here to sign up for a Barclays student account.

Lloyd’s Bank

  • 0% interest overdraft
  • Up to £2000 overdraft
  • Free Totum card

Conditions: Must be 18 or over, and have a confirmed place at a qualifying UK University/college.

Click here to sign up for a Lloyd’s Bank student account.

Does going into student overdraft affect your credit score?

how does a student overdraft work
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Your credit history will affect your credit score, but your student overdraft won’t, in most cases. Why? Banks don’t prioritise student current accounts when deciding who to dish out credit cards to. Most students in the UK don’t have a good credit score because they haven’t had enough time to build a perfect credit score, and credit companies know this. As a student, most credit companies will use your degree and your likelihood of employability as a gauge. The good news is that taking out student loans will have no effect on your credit score and won’t show up on your credit record.

How long can you stay in a student overdraft?

how do student overdrafts work
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Students with a student overdraft can dip into it for as long as their degree lasts, usually around 2-3 years. However, after you graduate, some banks will automatically change your student current account to a graduate one. This means that you’ll have to pay interest on any money you take out of your overdraft. Some banks will have 0% interest on their graduate accounts for a short time, so that you can have time to pay off any remaining fees at the end of your degree.

If you’re still struggling to choose your student bank account, take a look at our list of the best student bank accounts in 2022.