Student Bank Accounts & Overdrafts for Medical Students
Student bank accounts are simply current accounts that let you pay money in and out, set up direct debits and offer additional benefits such as an overdraft. They are designed for students in higher education, such as those at university.
Do I need to open a student bank account as a medical student?
Now that you are over 18, you may have access for the first time to borrowing money from the bank. As a student, this will most likely be in the form of a student overdraft facility and it will often be free of any interest charges until a set limit, usually around £1000 for the first academic year. This means you can borrow up to £1000 from the bank and not just take out the money that you have actually paid in. These perks often continue until you graduate, and beyond with some banks.
Chances are as a medical student you will need to borrow money at some point over and above any student maintenance loans you may be entitled to. Please also remember that the university may also provide access to learning funds, hardship funds as well as other grants and bursaries. It is worth checking these out and claiming them if you are entitled to them.
Student bank accounts do not have the need to pay any money that you use from your overdraft until perhaps the end of your course.
Medical students have to purchase equipment, such as a stethoscope and textbooks, as well as travel to placements. Some medical schools may reimburse such expenses, and some may even supply you with a university tablet.
Banks may also offer you other freebies such as a cash incentive when you sign up, railcards and discounts on shopping at certain retailers.
You can open one as soon as you get a confirmed unconditional place at university and you can use it to pay in any student loan or bursaries. You can also use your student bank account to pay your rent and for any other services you may decide to take out, such as a mobile phone.
Please note this blog does not constitute financial advice and you will need to do your own research to assess the suitability of any financial product.
What ID do I need to open a student bank account ?
All bank accounts need you to provide formal identification. This can include your passport, birth certificate and driving licence. If you don’t have a passport or driving licence, I would advise you to apply for one, even if you have no intention of travelling outside of the UK. A passport appears to be the only universal recognised form of ID. These two may be the only acceptable forms of photo identification for some organisations.
The university may also issue you with your own student ID, which you will use for signing in to lectures and accessing the library, for example. Student ID will not usually be accepted as ID for financial institutions. Hospitals may also issue you with a photo ID for use on the wards. You may also be asked to show your ID when you start hospital placements.
They may also ask for proof of your current address which could be your home address if you are opening a bank account before term starts.
Once you are 18 you can register to vote, so do so. Banks will conduct what is called a credit check which involves checking the electoral register, and as you may not have much financial history, this may result in some banks refusing to offer you any lending such as an overdraft.
You will also need to show the bank that you have a confirmed place at medical school, and this can include your UCAS code or a confirmation letter with an unconditional offer. A copy of the UCAS track may also be acceptable. Open the account now so that you can use any benefits before you start at medical school. You can often sign up online and also in branches.
Which bank should I choose to open a student account ?
You will need to do your own research on this. Look at factors such as if there is a branch on campus or near the university, although in practice, I personally bank over the internet and on the phone now. Student internet banking is critical for busy medical students. Documents can be opened and, in most cases, electronically signed online.
However, there is another factor that is often overlooked by students. One day, perhaps after you graduate, you may wish for further borrowing in the form of a mortgage to buy a house or perhaps a loan to help with other plans. Building a credit history with a bank is important, as it shows them that you are able to effectively manage your finances. On this basis, I chose HSBC as they tend to offer cheaper lending once you have qualified compared to other banks, but the lending criterion they use will perhaps be more stringent.
You are normally permitted to only have one student bank account at a time and questions may be asked if you choose to change banks through your studies.
In the past, some banks offered extra perks for medical students, for example an overdraft facility that increased in amount every year even beyond year 3, but I believe this may no longer be the case.
The bank may insist that you pay any student maintenance loan initially into its bank account, but then there are no restrictions on taking it out or moving it elsewhere.
Some banks also offer a guaranteed overdraft which will be at the limit that is stated on their website. All will do a credit check and may offer you much less borrowing and perhaps even none at all. They may also refuse to increase the amount of interest free credit on your overdraft year on year. You may also have to ask the bank to increase your overdraft limit manually every year if you feel that you need this.
On qualifying as a doctor, the bank may convert your account to a graduate account, which may have perks such as continuing the interest free overdraft for a certain period. There may be extra perks if you qualify as a professional, such as a doctor.
They may insist that you use your overdraft for personal use only. You will get into problems if you start using your student account for investment purposes or start running a business from it, more so if you borrow from your interest free overdraft for such purposes.
If the bank refused to let you open a student account, you will need to find out why. This is beyond the scope of this article, but it could mean you have to open a regular bank account which may have no overdraft and regular charges for using it.
You must never go over your agreed overdraft limit. If you try to do so, your bank may refuse the transaction, which may be embarrassing for example if you are trying to buy something or eating out with friends, or permit the transaction to go through and charge you penalty fees and interest charges.
Remember any money that you borrow from the bank must be paid back eventually, so you must be financially prudent and responsible with money. Remember an overdraft if not your money but the bank's money. As you are now over 18, you will personally be responsible for any money that you borrow from the bank and parental consent will no longer be required. Be careful of what you sign for and what financial commitments you get yourself in. Don’t be tempted by signing up to or purchasing unnecessary products during freshers week.
Don’t use your overdraft unless you really need it and perhaps try and pay some of it off over summer if you are working. Not every student has parents who can afford to bail them out financially. If for whatever reason you drop out from your studies, you are still liable to pay any overdraft that you may have accumulated and the bank can end your lending facility.
Should I take out a student credit card?
All student bank accounts should offer a debit card which allows you to take money out from a cash machine and pay for most purchases. However, there is another form of borrowing they may offer you in the form of a credit card. The amount of money you can borrow from a credit card, even the student variety, is usually capped at around £500 to start with.
Golden rule - never, ever borrow from a credit card and why would you when you have a free student overdraft facility?
Credit cards tend to be the most expensive form of borrowing. You normally get a statement every month which covers the previous month's spending and have to pay a minimum payment back every month by a certain date.
If you fail to do this, the interest rate can be astronomical as well as separate charges for missed payments and going over your credit limit.
However, they can come with perks, such as discounts in certain retailers and even cashback on purchases.
The prudent student will pay off credit card debt every month automatically in full by direct debit, therefore incur no interest charges and enjoy the perks 😀
However, the main benefit of having a credit card is that it builds up a credit history. If you apply for credit from another bank a few years down the line, they will see that you have kept a financial commitment for years, not missed any payments and kept within your limit, which helps with lending decisions.
Again credit checks and decisions about choosing credit cards are beyond the scope of this blog, so you will need to do your own research.
