Students - look beyond freebies for re-freshing overdraft rates
Students heading to university in the next few weeks need to look beyond the tempting incentives offered by providers to get the best deal on their student accounts.
Analysis by moneysupermarket.com has found that student accounts vary greatly in what they offer.
Life as a student can be costly, and sometimes you'll need to dip into an overdraft to tide you over. HSBC and Halifax offer interest-free overdrafts of up to £3000, compared to other providers, who offer up to £2000. For those who anticipate needing a large overdraft it may be worth considering HSBC and Halifax. For students who tend to stay in credit, most accounts pay just 0.1 per cent on balances, although HSBC and Santander offer two per cent on amounts up to £1000 and £500 respectively.
The analysis also found the amount charged for using an unauthorised overdraft varies greatly across the providers. For example, Lloyds TSB has an 8.2 per cent EAR for its student account, while Halifax charges 24.2 per cent. Others lenders, such as Santander, charge a one off payment of £5 per day, capped at 10 days per month.
Kevin Mountford, head of banking at moneysupermarket.com, said: "With university tuition fees set to increase yet again by autumn 2012, there has never been a more crucial time for students to consider their finances. It's important to get the ball rolling before the excitement of freshers week kicks in, so university life can be enjoyed to the full, without financial worries when it's too late.
"Overdrafts can be confusing for school leavers heading to university as many will not have had one before. Many students will end up relying on this facility to make ends meet between loan payments so securing one with a decent limit is crucial. However, students should ensure they can realistically pay back any money they borrow from the bank. It's also worth nothing that 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 could risk facing additional interest payments. For those lucky enough to be in credit throughout their studies, an account with a decent credit interest rate could be a good option, such as those from HSBC or Santander.
"Most providers offer a number of benefits such as worldwide travel insurance, laptop discount and mobile phone insurance, free music downloads or an NUS or Young Persons Railcard. Although these freebies may be useful, the value of them will be low compared to interest-free overdrafts- which should be the key focus for those considering a student account this summer."