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Top the class with the right student bank account

Top the class with the right student bank account

Category: Banking

Updated: 03/08/2010
First Published: 03/08/2010

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 It is now over 6 months old so the content may be out of date.

Hundreds of thousands of students are currently gearing up to embark on university life, but getting your finances in order first could prove to be a first-class decision.

For many, it will be the first time they are put in complete charge of their money, but with the likelihood of finishing studies in five-figure debt, it is certainly worth putting some time into looking around for an account to suit you.

Many students spend a great deal of their time living in their overdraft, so finding an account which lets you go into the red without incurring interest will be very important to some.

There are a great many student accounts that do offer interest free overdrafts, with Halifax affording students a highest limit of £3,000.

Other options include taking out an account that gradually ups your interest free limit as you progress through your university years.

For instance, The Co-operative Bank offers £1,000 interest free in year one, £1,700 in year two and £2,000 in year three, making it a good option for undergraduates.

What students do need to be aware of is that many providers quote their interest-free overdrafts as 'up to', meaning they might not offer the full amount if somebody's credit score is deemed too low.

Students should be sure not to be too swayed by incentives banks offer. Cinema tickets, breakdown cover and mobiles are tempting, but you may find that you pay for these items many times over with a high overdraft rate.

It is also worth checking how much your bank charges on its student overdrafts after you exceed your interest free limit. Even if it turns out to be quite preferential, this course of action is about as advisable as skipping lectures, as without a regular source of income, charges can add up.

This is also true for borrowing on credit cards, even if the limits are small. Just a couple of hundred pounds can take years to pay off if you are only making minimum repayments.

And, if you do fall into money troubles, Moneyfacts.co.uk's Michelle Slade has this sage advice:

"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.

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

You can prove your credentials by checking the Moneyfacts.co.uk Best Buy tables for the best student accounts the market has to offer.

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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