Best Student Bank Current Account Overdraft & Fees Analysis July 2012

By: MoneyFacts

Countless students will be preparing to leave home next month and head off to university.

For many it will be the first time they are fully in charge of their finances, with budgeting and bill paying becoming a necessary evil.

Due to the increase to course fees, student debt is set to become an even bigger problem, which is why all students should put their research skills to good use to find the most suitable student account for their needs.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, commented:

“As most students spend their university life living in their overdraft, it is worth finding an account that offers a good interest free overdraft.

“Inevitably, many will need to exceed this limit, so it’s important to check the charges additional authorised borrowing can incur.

“Halifax and HSBC offer an interest free overdraft of up to £3,000 from year one, which is the most generous in the market.

“Other accounts offer a tiered system, with the level of interest free borrowing increasing each year and the high level only available in years four or five.

“By comparison, Clydesdale and Yorkshire banks do not offer any interest free overdraft facilities to students at all.

“It is worth bearing in mind that most overdraft limits are quoted as ‘up to’. The level of overdraft offered will be credit scored and if you don’t fully match up to their criteria, you may be offered a lower limit.

“Many banks offer incentives to students to try and tempt them into choosing their account, but these should be a perk and not the reason for selecting the account. While discount offers and cinema tickets may have short term appeal, you could end up paying for them twice over with a higher overdraft rate.

“Incentives this year include extras such as discounted breakdown cover, free traveller’s cheques and currency, discounts in stores and Santander is offering £50 cashback for new accounts or switches until 31 August 2012.  

“While borrowing on a credit card may seem tempting, students should treat this with caution. Although credit limits offered to students are small, if you have no regular income to repay the debt then even a few hundred pounds can soon escalate as interest charges mount up.

“Many students will receive their grants as a lump sum at the start of each semester. It is worth setting yourself a weekly budget to ensure that you continue to have money to live on throughout the term.

“If you do get into trouble with your finances, don’t bury your head in the sand. Unauthorised borrowing can be very expensive and soon mounts up. If you tackle any issue head on, the bank will be more lenient and willing to help.

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