“I’m already well into my overdraft”!  It’s a sentence we’ve all heard when living at university, and maybe you’re guilty of it yourself. The student overdraft is a university staple, a popular source of extra cash when funds are running low. Read on to find out everything you need to know about the student overdraft, and how to get the most out of yours at university. 

What is a student overdraft? 

• An overdraft is a pre-agreed loan given to you by your bank 
• The best and most defining feature of a good student overdraft is that has 0% interest – meaning that you don’t accumulate extra fees on what you spend
• There’s two types of overdrafts. An ‘arranged’ or agreed overdraft is the pre-agreed loan that you’re allowed to borrow into your current account. Your overdraft can turn into an ‘unarranged overdraft’ if you go over the limit that you’ve agreed with your bank. Find out more about this below. 

Managing your funds 

Careful, an overdraft isn’t just ‘free money’ – although it certainly looks that way in your bank account! Make sure that you’re managing your overdraft funds sensibly. 

• Don’t go over your overdraft limit. You’ll get charged fees if you do, which means you’ll have entered into an unauthorised/unarranged overdraft. If this happens, your payment will bounce, or you’ll get a penalty fee from your bank. It’ll vary from bank to bank, and normally you will be subject to a daily fee for every day that you go over your limit. 
• Your bank can cancel your overdraft unannounced. Remember that no overdraft is 100% reliable. It’s unlikely that this will happen with a student account, but make sure to read any emails or letters that your bank sends you to make sure. 

Comparing providers

Every high street bank will offer a student overdraft. Generally speaking, what each one offers tends to be relatively similar, but it’s useful to get the best deal possible and know what all your options are. Here’s some of the best choices. 

Santander:

• Why it’s great: Santander’s 123 Student Account is the only bank account with a guaranteed 0% overdraft each year. It’s also the only bank that lets you claim a free four-year 16-25 Railcard (worth £100) which gets you a third off the majority rail tickets (not valid in Northern Ireland)
• Overdraft details: you’ll get  a £1,500 overdraft in Years 1-3 of your degree, with £1,800 in year 4 and £2,000 in Year 5 if applicable. You’ll need to be starting your first year of university of level 4-7 apprenticeship to apply

HSBC: 

• Why it’s great: You can claim a higher overdraft in Year 2 of your course (NOT guaranteed!). \
• Overdraft details: You’ll get £1,000 in Year 1, up to £2,000 in Year 2, and up to £3,000 in Year 3 and above. In order to claim a higher overdraft in Year 2, you’ll need to get your credit record checked, and have at least £500 coming into your account a term (your maintenance loan should cover this) 

Nationwide: 

• Why it’s great: Get 5% cashback up to £10 a month when you use your debit card at a wide range of supermarkets
• Overdraft details: You’ll get £1,000 in your first year, up to £2,000 in your second year and up to £3,000 in your third year. You’ll need to have a confirmed offer on a UCAS course that lasts at least 2 years to apply

Other things to remember

• Remember that you can only open one student account! Many banks will have a clause in their terms and conditions that limits you to just one student account, and it may be recognised as fraud if you violate it. Your overdraft will come with your student account, so choose a bank that you want to use to manage your money and stick to it. Even if you manage to find a way around this, opening multiple student accounts to get access to multiple overdrafts is an easy way to spiral into debt of thousands of pounds. 
• Make sure to use mobile banking. Using your bank’s mobile banking app means that you’ll have access to your funds in a couple of minutes. It’ll let you get control of your finances to get a picture of where your funds are going and how much you have in your account. This way, also less likely to exceed your overdraft limit 
• Remember that your credit rating could be affected by your overdraft. If you exceed your limit multiple times, or have been turned down for overdraft extension requests, this could be a sign that your credit rating needs improvement! 

Be sure to check out the Roome website, where we post loads of tips and tricks for university students every single week. Follow us on LinkedIn, Instagram, TikTok and Facebook to learn more about how we’re revolutionising the student housing market!