Best student bank accounts

The big banks are trying their hardest to get you to open student accounts with them at the moment. It’s big business for them: graduates are unlikely to change banks so by getting people to open student accounts, they’ve nabbed customers for years.

If getting your custom is important to them, choosing the right student bank account is more important to you.

But with so much choice, and many of the competitors for your custom distracting you with shiny temptations - £100 cashback here, discounts on CDs there – how can you ensure you’re with the best student bank account during university?

Consider the overdraft limit

Students who don’t live in their overdrafts are rare creatures indeed. This makes the overdraft limit an important consideration. There’s a wide range of available overdrafts, from HSBC, which offers a £1000 limit in the first year at university and £1500 in the third year, to Halifax, which offers the most generous overdraft limit of £3000.

Perhaps however you’d welcome some enforced limitation on your spending? After all, the temptation to spend whatever is available is almost too difficult to resist!

Also, note that – as Michelle Slade, analyst at Moneyfacts.co.uk, says - “The higher limits are often quoted as ‘up to’, so when you come to apply, if your credit rating is not A1 or you don’t match Halifax’s ‘perfect student’ score card, you may be offered a somewhat lower limit.”

Misdirection?

A magician will distract his audience so they don’t notice the trick he’s carrying out. The perks offered by banks are pretty good distractions, but keep your eye on the more boring, but more important details of a bank account.

Says Michelle Slade: “The cash incentive of up to £100 from Lloyds TSB may sound appealing, but £80 of this requires you to recommend four friends, all of whom have to open the account by 15.09.08”.
However, some perks are definitely worth more than others. Says Slade: “While free cinema tickets or discounted CDs may sound great, the offer of a rail card (NatWest) could save you a fortune if you intend using the train to get to and from college.”

Branch near home

Online and telephone banking have made this consideration a little less important, but if there’s a branch of your bank on your campus, and near your home, it will save you a lot of hassle. A quick internet search will reveal the most convenient banks location-wise.

The graduate account

The last thing you’re likely to think about in the upheaval of leaving university and the ensuing job/house-hunting is whether you’re with the best graduate account. Do yourself a favour then by thinking about it now. When will your bank expect you to pay off your overdraft? Check out their graduate account details to get a fair idea of what to expect.

The credit card

Many of the student accounts also offer a credit card. The limit is generally around £500, but this could be a life-saver if things get tight at the end of term. However, make sure you know the annual percentage rate (APR) of the card, which will tell you how much interest you’ll be charged if you don’t pay the money you spend on it off in full each month. And if you can get by without a credit card, do. They’re an extremely expensive way to borrow money.

Ethics

Eight in ten people would prefer an eco-friendly product to a non-eco friendly product. In response, the Co-operative bank launched an ethical student account last year. The bank has a strong ethical policy which dictates the way it invests money. There are no freebies, but a £1400 interest-free overdraft in year one, rising to £2000 in year three.