The key to a good student account

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Written by Mark Burton
Know Your Money editor

As in years past, the overdraft facility will be the most important aspect to consider when choosing a student account, experts have claimed.

In a recent expert panel session held by headlinemoney.co.uk, Abbey and Alliance & Leicester current accounts manager Gillian Almond explained that the size of the overdraft offered on a student account is the key thing to look out for, while other incentives that will help students adapt to university life will also be important.

Weighing up the overdraft

This year, Halifax once again takes the crown as the heavy hitter in the overdraft stakes, offering a facility of up to £3,000. However, students about to enrol, in university should be mindful that they may not be approved for this full amount, as the bank assesses the financial credentials of each customer individually.

Meanwhile, many students have found the staggered overdraft facilities offered by the likes of Abbey, HSBC and NatWest as an attractive draw. By increasing the maximum overdraft limit at the start of each academic year, students may find it easier to avoid a spending frenzy when they arrive on campus for the first time.

Of these staggered offerings, Abbey and HSBC both start students out at the lower end of the overdraft spectrum with a facility of £1,000. This then increases incrementally every year for courses up to five years in length. In the final year, both banks will offer a £2,000 overdraft.

The NatWest also offers a maximum overdraft of £2,000 for courses up to five years, but starts off with a more generous maximum limit of £1,250.

For those that feel they can take responsibility of their spending without a staggered account, Halifax, Royal Bank of Scotland and Barclays all offer an upfront £2,000 for students enrolling in their first year.

What about the incentives?

While banks have long attempted to attract students with offers intended to complement their move into university life, HSBC's head of youth, student and graduate banking Lucy Payne, has claimed that this year, undergraduates are acutely aware of the financial strain of completing higher education.

She explained many young people have taken on part-time jobs over the summer and have been diligently putting money away to make sure that they can avoid financial hardship.

For this reason, this year students are more focused on the financial support offered banks and are on the hunt for an account that will help them to stretch their budget as much as possible and avoid heavy debts.

"Going to university is no longer just an academic challenge for students but a financial one too. Students want real help and support when looking after their finances and have become more and more averse to bank provided debt (overdraft and credit cards) if at all possible," Ms Payne commented.

Abbey has also latched on to this change in sentiment and is offering students financial rewards for keeping accounts in credit and continuing to put money in, as well as taking cash out.

Meanwhile, Phil Cook, head of student banking at NatWest and RBS, pointed to NatWest's ever popular Student Rail Card, which offers a third off rail travel for the duration of a course. He explained that while the card has been a major hit with students for many years, this year it is likely to be even more popular as students search for practical incentives that will help them cut the costs of university life.

The NatWest spokesperson added that when choosing a bank account, it is important to be on the lookout for non-gimmicky incentives that will deliver real savings, as in the long run, these can prove to be as important as overdrafts in helping people through university life and avoiding financial hardship.

"Look for benefits that you would normally spend money on anyway - like free or discounted travel, discounts off laptops, broadband, discounts at high street retailers," he added.

Meanwhile, students may also do well to keep an eye on interest rates charged on overdrafts once university is over, as many offer interest-free breathing periods that many prove particularly useful for those finding it difficult to secure a job immediately after graduation.

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