In the run up to a new academic year, prospective students and those ready to graduate would be wise to take time out to choose a cost-effective bank account that will cover their day-to-day needs throughout their studies.
After all, new university students will be living away from home and in charge of their finances for the first time in their lives, so picking a good student bank account and learning how to manage their finances will be essential.
A few years on, those about to graduate should review their current arrangement with their bank and decide whether switching would be the best option for them – but no matter what stage you're at, choosing the right account may not be as simple as it seems. There are plenty of things you'll need to think about, from the account features and incentives to overdraft facilities and branch location, and it's vital to focus on the right aspects when making your decision.
"Students must be wary not to impulsively choose a bank account simply for the upfront perks, because they need to be sure that the account can support them through their years of education," said Rachel Springall, finance expert at Moneyfacts. After all, some perks are just gimmicks and don't really give much value to the longevity of the account – there are some that could be worthwhile, such as a railcard (available from Santander) or a coach card (from NatWest), but others may not be so worthy.
It's far more important to thoroughly research all the available accounts and pay particular attention to overdraft facilities, as these are what can really help you in your years of study.
Yet even this should be viewed with caution. "Using an overdraft facility is an effortless temptation, and while they're indeed designed to help students cover expenses, they should never be abused, as the debt will need to be paid back," said Rachel. "There is a huge danger of racking up a large amount of debt and not being able to pay it back when the time comes, which is why students should do everything in their power to use it sparingly and do their best to earn additional income to reduce what they owe."
Currently, the best interest-free overdraft facility on offer is a generous £3,000 upfront, available from both Halifax and HSBC. Alternatively, other accounts spread the amount given to students over the years of their study, which can be a much more sensible option for some – particularly if you don't want to worry about maxing out the full £3,000 overdraft in the first year.
However, as with any bank account, it's worth noting that the biggest overdraft limits are not a guarantee as applicants will be credit checked, so having a good credit score is vital. Read our guide to help boost your rating, and head to a credit check provider (such as Experian CreditExpert) to make sure you're on track.
Another thing to bear in mind is the provider's digital banking capability. Living away from home means being in charge of daily expenses, so checking payments on the go using mobiles or tablets will be very practical. Students don't necessarily need to choose a bank that's nearby or on campus as there may not be many options to choose from, but if you'd value being able to speak to someone face-to-face, it could still be worth bearing this in mind.
And what about when your studies are coming to an end? "Graduation comes around quickly, and when it does it's time to pay off any overdraft that has accrued through the years," said Rachel. "Graduates should never assume the new default account offered by their current provider will be the best for them, so it's time to swot up on all the available deals to find the right account. Taking time out to compare deals and becoming more financially disciplined will pay off big in the long run."
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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