Santander is ramping up competition for student customers by offering those who open a current account a free railcard which will save them one third of the cost of most train journeys.
The bank said it has landed an exclusive contract with the Association of Train Operating Companies (Atoc) to provide the 16-25 Railcard for the next four years, which will help the company's focus on student finance.
The card usually costs £30 a year. It will be free and valid for four years to anyone in this age group, in full-time education, who opens a new Santander student account for the first time.
The multi-million pound deal gives Santander exclusive rights over the railcard from today. The previous provider, NatWest, had held the contract since 2004.
The contract is part of Santander's strategy to grow its current account base, by attracting a substantially increased number of student current account holders who it hopes to hold on to after they have graduated.
The bank has more than one million customers who use its flagship 123 current account, which offers cashback on household direct debits and in-credit interest for a £2 monthly fee. It hopes to see more students moving on to the 123 account after leaving education.
According to estimates from Atoc, the card will save students £174 on average on their rail fares each year. There are currently 1.4 million 16-25 Railcards in circulation.
Steve Pateman, head of UK Banking at Santander, said: "We have been working hard on our switching proposition and on convincing customers to switch to Santander from other banks - so much so that 250,000 of them have done so in the last 12 months."
He said the four-year deal represents "a significant step towards our goal of increasing the number of primary banking customers by securing a substantial increase in student account openings".
Competition among banks and building societies is set to step up in the coming months, when new rules come into place to take much of the hassle out of switching current accounts.
New rules being introduced by the Payments Council will cut the length of time it takes to change provider from 18 to 30 days at present to just seven working days, from September. Account switchers will also see incoming payments automatically redirected into their new accounts.
Santander's student current account is fee-free and offers a variable interest rate of 1% on balances up to £500 as well as features such as online and mobile banking. The bank has 44 branches on university campuses.
Rachel Springall, spokeswoman for financial information website Moneyfacts, described the free railcard offer as a "great incentive".
She said: "Making the £30 per year saving on the Railcard price, along with the discounts on commute costs for four years could prove a popular choice when deciding on what account to take out.
"The account continues to offer an overdraft of up to £2,000 and interest of 1% on balances up to £500."Suggest a correction