Aside from the shop discounts, big nights out and newfound freedom, one of the top benefits of becoming a university student is the opportunity to open a student bank account. All the major banks offer them, and many also offer special deals and gifts to try and attract you in. When shopping around for your brand new student account in the run-up to fresher’s week, it can be tempting to get roped in by the shiniest freebie offer in the window, but it’s also important to know what you’re dealing with and what’s on offer to you. Don’t just pick the bank that has the closest branch to your halls or an ATM in your union; choose wisely to maximise your money.

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The main feature of the student bank account is the overdraft. This facility allows you to spend more than you’re getting in, which can certainly be handy, but should be managed wisely. What separates a student overdraft from a normal overdraft is that it’s interest-free, so you don’t have to pay a fine when you go into the red. There is, of course, a limit to this, so find out before you sign up exactly how much the bank is offering you interest-free, and how much it will go up by for each year that you’re in education. The most important thing to remember is to never go over the agreed limit; the fines can be extremely high and grow each day you stay over. If things get really tough and your parents won’t fork out the extra, it’s better to chat to the bank about extending the overdraft rather than going over the limit. Remember as well that your overdraft limit isn’t a spending goal! It’s not really your money, it’s still the banks, and come graduation day you’ll need to start paying it back. Compare the different graduate account deals too: once you graduate you’re still eligible for reduced interest deals that allow you to pay back what you owe gradually, so you’re not thrown in at the deep end.

In terms of picking from the many high street banks out there, only a few have announced there 2013/2014 student deals so far, so it may be worth holding out if you can so you get a clear picture of what’s on offer. From what’s been announced so far, there are various factors to consider. If it’s a big fat overdraft you’re after, the Co-operative Bank is offering the highest interest-free overdraft at a £2,000 max in your third year. Don’t forget to ask for the overdraft increases each year if you want them though. Halifax comes up in competition with Co-op for those seeking a large overdraft with a potential £3,000 limit for all three years, but this isn’t guaranteed and has to be arranged directly with the bank on an individual basis. HSBC has a similar offer, and pays out 2% interest on your first £1,000 in the bank during your first year. It’s always worth considering whether the largest possible overdraft is really in your best interest in the long-term, as it bears repeating that you will have to pay it back! If you need cash for a short term only you may be better off using Readies and paying it back quickly.

If the freebie is your priority, and especially if you travel by train frequently, then the Santander 2013/2014 student account deal could be the one for you. The overdraft isn’t as impressive as the Co-op’s at £1,500 maximum, but they’re offering 1% interest on your first £500 of credit, and a free young person’s railcard that will last you four years. Harking back to the popular but discontinued Natwest railcard offer, this is a saving of £120 if you usually buy a railcard and big savings all in all if you travel lots.

At the end of the day, it’s all down to what matters most to you. Look around, ask questions, and don’t choose on impulse or based on what your mates are going for or who your older brother went with in 2008. It’s all about being well informed and budgeting carefully, and you should be up for a student experience that’s free from finance stress.

by: John Savage

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