How to pick the best student bank account

female student The first thing students need to study is bank accounts

For many teenagers it has been more than a week since they got their A-level results, and many will be making plans for university.

Among the earliest challenges will be sorting out their finances, and in particular finding the best bank account to meet their specialised needs.

But how easy is it to be dazzled by offers of cashback, free theatre tickets, or discount cards?

From the banks' point of view, such incentives have always been more than worthwhile.

For once a customer has opened his or her first bank account, the chances of switching are still relatively low.

In fact last year just 2.5% of all bank customers switched accounts.

So how do you decide between all the accounts on offer?

'Confused'

Start Quote

stephannie fitzgibbons

I got quite distracted by it all and I started looking at the gimmicks rather than what they had to offer as a bank”

End Quote Stephannie Fitzgibbon Student

Nineteen-year-old Stephannie Fitzgibbon is one of around half a million students entering university for the first time.

She is off to Brighton University to study physical education and has found the choices on offer fairly baffling.

She has already applied for her student loan, and together with her father, has studied the various options.

But she has been surprised at how tricky she has found it to make her decision.

"Most of them - the first thing they tell you about - are the gimmicks," she says.

"As a first-time student I got quite distracted by it all and I started looking at the gimmicks rather than what they had to offer as a bank.

"That was a bit complicated for me because I got confused as to what I was meant to be looking for."

Such incentives range from free young persons' railcards to free music downloads, and even money off holidays abroad.

After getting advice from her parents and researching on the web, Stephannie soon focused on the interest-free overdraft element of bank accounts.

Students can access up to £3,000 in interest-free overdrafts.

However Stephannie decided to choose an account which staggered the amount of interest-free overdraft available to her, in order to help her through her entire time at university and not just her first year.

Student Accounts

Bank Account name Interest free overdraft year one Additional authorised borrowing

source: moneyfacts

Bank of Scotland

Student

£1,500

8.21%

Barclays

Student Additions

£2,000

8.9%

Halifax

Student

£3,000

7.2%

HSBC

Student

£3,000

0%

Lloyds TSB

Student

£1,500

8.21%

Nat West/ RBS

Student/ Student Royalties

£1,000

not available

Santander

Student Current

£1,500

not available

Overdrafts

Experts advise students to look very carefully at the small print.

How much is a bank going to charge you if you go overdrawn accidentally? What happens if your loan payment is late - will you be able to arrange an overdraft, and what might that cost?

An agreed overdraft from your bank can be cheaper than borrowing money elsewhere, particularly from payday lenders.

Tracey Bleakley, of the Personal Finance Education Group, advises that students need to look several years ahead.

"The key thing about picking a student bank account is to look at the long term. What did you need that student bank account for? What fees are going to be important for you? If you are going to use an overdraft, then look at the one with the best long-term overdraft."

She also warns against being drawn in by the non-financial benefits that many student banks accounts offer.

"Don't be swayed by the things you might get like theatre tickets, which are great when you sign up, but actually then you may be paying more for your bank account in the long term than you need to.

"So avoid the gimmicks, look at the small print and decide what the best account is for you in the long term," she says.

Book lists

But as well as choosing the right bank account, many freshers will be managing their money for the first time.

As well as advice from the web and her parents, Stephannie has also turned to her university's student services.

She has been in touch with Helen Abrahams, a student advice co-ordinator, who believes that many students are often unaware of alternative funding that is available.

"Check your entitlement first," she advises.

"Make sure you're getting everything you are eligible for from statutory funding, but also from your institution."

Helen also believes there are some simple budgetary rules first-time students should follow.

"Don't rush out and buy everything on your book list. Universities have excellent resources. Look to see what discounts you can get when you get an NUS extra card. Don't be afraid to ask if they do any reductions for students in shops and other services."

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