Pick account on financial merits, students told - Banking - News - Moneyfacts

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Pick account on financial merits, students told

Pick account on financial merits, students told

Category: Banking

Updated: 27/07/2009
First Published: 27/07/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
With the new university year just a month away, students have been urged to choose their accounts based on its financial performance rather than the incentives they offer.

Many banks and building societies offer freebies such as five year railcards and money off mobile and computing equipment, but with many students likely to live from their overdraft, it is important that they choose an account that suits their financial needs.

"Many banks offer incentives to students to tempt them into taking their account, but these should be a perk and not a reason for selecting the account," said Michelle Slade, spokesperson for Moneyfacts.

"While discount offers and cinema tickets may seem tempting, you may end up paying for them twice over with a higher overdraft rate."

More important to many will be an account that offers a significant interest free overdraft. There are a number on the market, with Halifax offering the highest level of up to £3,000 from year one.

A tiered system, whereby banks and building societies increase the level of an interest free overdraft, is more common. The limit for the first year is typically around £1,000, rising to £1,500 and £2,000 by year three, although there are accounts with higher limits. Options for four and five year courses are also available.

Some students will inevitable fall into financial difficulty, but have been warned against using credit cards to any great extent. "Although 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," said Ms Slade.

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

"Many branches at or near universities also offer a specialist advice service which can be invaluable in helping you manage your money."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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