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Freshers - beware of student account freebies

20th August 2015 Print

Students warned to not sign up to the first bank they see at the fresher’s fair and to look beyond the freebies.

Make the most of interest free overdraft rates or the best in-credit rates for a first class student account

With the cost of going to university increasing year on year, students looking to make every penny count could benefit by looking for the right bank account to suit their needs. MoneySuperMarket offers tips when it comes to looking for the best student current account deal.

Manage your overdraft limit

Student life can be costly, which means dipping into an overdraft may be inevitable. HSBC and Halifax offer interest-free overdrafts of up to £3,000 over the duration of your course, compared to other providers who offer up to £2,000. Those needing an overdraft should look to apply for an amount that suits their budget to avoid the temptation to overspend - it all has to be paid back eventually! Most banks won’t offer the full overdraft facility in one go, it is usually tiered depending on the length of the course.

Check in-credit interest rates

For students who tend to stay in credit, some accounts offer some tempting in-credit interest rates. Santander’s 123 Student Account, for example, is offering 3.00 per cent on balances paid in between £300 and £2,000 which is a lot higher than most savings accounts are offering at the moment. However, to earn this level of interest, you must ensure that you are able to credit the account with a minimum of £500 each month. Similarly, HSBC is offering 2.00 per cent on balances up to £1,000 in the first year of university, and TSB is offering 5.00 per cent on balances up to £500.

Account benefits and ‘freebies’

While many banks offer benefits such as discounts on shopping, and travel, they are only worth the value if you will genuinely use them. So for instance, the free 16-25 railcard available with Santander is great if you will be spending time on intercity trains – but worthless if you never leave your student digs. Spend time looking at all of the features on accounts, and not just the freebies.

Kevin Mountford, head of banking at MoneySuperMarket, said: “The student banking market is big business for banks because they know once they’ve got a student as a customer; they could be a customer for life. Many banks have a presence during fresher’s week to tempt students with special deals there and then, instead of advertising them online. However, it’s worth thinking beyond just the freebies, – instead freshers should take time to compare what’s on offer and work out the best deal to suit the way they will use their account.

“Most student accounts offer interest-free overdrafts, which are the key feature for many cash-strapped undergraduates as they ease the cost of debts racked up whilst completing their degree. Going for the largest overdraft on offer makes sense, but don’t just take this as an incentive to spend – it will have to be paid it back eventually. Also, most banks don’t make the full overdraft available from the off – instead it is released in blocks over the course of the degree, which should help stop overspending.

“Zero per cent deals on overdrafts tend to expire after graduation, so students need to plan how they are going get themselves back into the black, or they could risk facing additional interest payments. While it’s great that so many providers offer a spending buffer via an overdraft, it’s important they don’t exceed this limit – otherwise they could face high interest rates and penalty fees. If students do come close to the limit then they can talk to their bank to see if they can agree a higher amount.