Student Overdrafts Explained: Pros & Cons

Heading off to university? It’s a big step – and a big adventure.

There’s a lot to think about, including how to manage your money for the first time. Between rent, course materials and everyday spending, your budget might feel a bit stretched now and then.

That’s where student overdrafts can help. They offer interest-free borrowing that can give you a bit of breathing space when you need it.

You may be asking yourself, "Should I have an overdraft?” and “What are the risks involved?” Here’s some things to think about including how they work, the pros and cons, and how to manage one responsibly.

What is a student overdraft and how does it work? 

A student overdraft is a type of arranged overdraft that comes with a student bank account. It lets you borrow money through your current account up to a certain limit - and most offer 0% interest while you’re studying at University.

Although a student overdraft doesn’t charge interest while you re studying, it’s still a form of borrowing. Keep in mind that interest will be charged if you exceed your arranged limit or if you go over your interest-free entitlement.

Using it carefully can be a helpful way to manage your money, especially during busy term times. But it’s worth remembering that you’ll need to pay it back - and not doing so could affect your credit score or how much you can borrow in the future.

The key is to use it for unexpected costs, not as spare cash - and to have a plan in place for paying it back when the time comes.

• Learn more: What is an overdraft?
• Confused by jargon? Check out our Student borrowing: jargon buster

When do you have to pay back your student overdraft? 

You typically dont need to start paying off your overdraft until after you graduate. Most student accounts automatically switch to graduate bank accounts, giving you more time to repay - often interest-free in the beginning.

However, you might choose to start paying it off when you can, such as when you receive a student loan, and gradually building it back up over time. Encouraging good habits and regular use of your main account is key to managing it well.

Want to know more? Here's what happens to a student overdraft when you graduate.

The benefits of a student overdraft 

So, should you have an overdraft as a student? For many, the answer is yes - provided you use it wisely. 

An overdraft can be a helpful tool to cover unexpected costs, like urgent repairs or lastminute textbooks, or to bridge any temporary gaps in your budget. 

It can provide peace of mind knowing you have a backup when money is tight. 

However, it’s important to remember that it’s still borrowed money that needs to be repaid, so managing it carefully will help avoid unnecessary interest charges or damage to your credit score in the future.

The downsides of student overdrafts

While student overdrafts can be a really useful tool, it’s good to be aware of a few things before you dive in.

• Going over your agreed limit could lead to charges - and might affect your credit score in the future.
• Because you don’t pay interest while you study, it can feel like it’s your money. But it’s still borrowed - and it will need to be paid back.
• If there’s a balance left after you graduate, your graduate account may start charging interest - so it’s worth having a plan in place.
• If you're worried about your overdraft, you can speak to the bank, and they'll help you find a solution.

If you’re asking, "does a student overdraft affect credit score?” - the answer is yes, especially if it’s not managed carefully. But using it responsibly can help you stay on track.

Tips for managing your student overdraft responsibly 

Most of these risks can be avoided with a few smart habits. Here’s how to stay in control:

• Keep track of your balance with banking apps and alerts.
• Stay below your limit - and avoid unarranged overdrafts.
• Try not to use your overdraft for non-essentials.
• If you can, start paying it back gradually, even while you’re still at uni.

For more advice, read our Tips for managing your overdraft and our full Guide to student budgeting.

How to get a student overdraft

You’ll usually need to:

• Be over 18
• Have a confirmed place on a qualifying course
• Pass a basic credit check
• Be a UK resident 

You can apply for an overdraft when you open a student bank account or add one later. At TSB, we also offer helpful tools like budgeting guides and information on student credit cards.

A student overdraft can be a great tool but it works best when you treat it as a safety net, not spare cash. By managing it wisely, you’ll build money confidence that lasts long after uni.

Need help? Visit our Help and Support page to get in touch.

17 or over (18+ including overdraft), UK resident for at least three years and be studying for a full time course that lasts for a minimum of two years or be on a one year access course leading onto a full time degree. TSB Bank plc is covered by the Financial Services Compensation Scheme and the Financial Ombudsman Service. For a student credit card you must have a TSB Student bank account holder for at least 3 months and have a regular income.

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