Term starting early for student bank accounts

As autumn approaches, the banking industry is gearing up for the start of university. We have already seen the summer introduction from Abbey and HBOS of new products in the hopes of securing the student pound.

And while gimmicks are nice, freshers should look closely at the interest rates available and the potential size of interest-free overdrafts.

Kevin Mountford, head of current accounts at price comparison site moneysupermarket.com, said: "For those off to university or college, getting your finances in order is crucial. Banks have always been keen to catch people at an early age because over a quarter of people stick with the one bank throughout their working life.1 Banks are therefore keen to offer tempting gizmos and gadgets to entice students.

"The industry uses teasers to draw in students, however these can often detract from the core features. In a lot of cases, the overdraft element will prove to be far more relevant for students. In general, overdraft limits are increased year by year, although the latest Halifax/Bank Of Scotland account can offer up to £3,000 from day one.

"Students need to remember the golden rule though – that overdrafts will need to be paid back at some stage.

"The likelihood is we will see many more products launching before the new term starts, but students should make sure they don't get seduced by headline rates and flashy giveaways.

"The new Abbey student account offers £50 cashback and in-credit interest of four per cent for the first £500, while HSBC has a good all-rounder with six per cent on balances of up to £1,000 and an interest-free overdraft of up to £2,000."


The four questions a student should ask are:

What interest-free overdraft can I get?
What other charges might I be subjected to?
Is there a branch nearby?
And finally – what are the freebies?