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It is essential to open a student bank account for your time at University. It is a good idea to do this before you start University, especially if you are applying for a student loan as the money will be paid directly into your bank account.

Most banks offer some sort of cash incentive or vouchers to entice you to open an account with them. Look past these 'freebies' to the more long term benefits, but remember that a Young Persons Railcard is going to be more useful in the long run than, say, a cheapo MP3 player. Make sure you know what overdraft limit there is available and read the small print so you know about fines and how to avoid them!

Contents 1 Choosing an account 2 Opening an account 3 Points to consider 4 Things to ask 5 The difference between Debit and Credit Cards 5.1 Debit Cards 5.2 Credit Cards 6 Banks 6.1 Abbey 6.2 Barclays 6.3 Halifax (HBOS) 6.4 HSBC 6.5 Lloyds TSB 6.5.1 Islamic Student Account 6.6 Natwest 6.7 RBS 6.8 The Cooperative Bank 6.9 Yorkshire Bank 7 If you get into trouble 8 Useful External Links 8.1 Comparisons of Student Accounts 8.2 General Advice 9 See Also

Choosing an account

Money Saving Expert publishes information on some of the best student bank accounts. Here you can compare the benefits of various accounts.

The National Association of Managers of Student Services (NAMSS) also offers some advice on choosing bank acconts.

Opening an account

To open a student account you may need to produce:

• a copy of your LEA award letter (Student Loan financial assessment form)
• Proof of your student status (usually AS12 UCAS letter)
• identification, eg passport, national insurance card, full driving license (overseas students should produce their passport and letter of admission or enrolment from the university)
• Proof of term time or home address.

Points to consider

Branch location and facilities

• Is my branch near enough for me to call in to discuss my finances?
• Is there a cash machine on campus or close to where I live?
• Can I use my cashpoint card at other banks' machines without being charged?
• Is there a student adviser? (You will need a familiar point of contact who is sympathetic to students and aware of their financial situation.)

Overdraft facilities

• What sort of interest free overdraft is available and how do I apply?
• Do I need to attend an interview with the student adviser before an overdraft can be arranged?
• Can I extend my overdraft limit and how do I do this?
• What happens if I exceed my overdraft limit?

• ALWAYS consult with your bank before going overdrawn, as banks usually impose stiff penalty charges on unauthorised overdrafts.
• Remember the bank may describe your overdraft as free but you still have to pay it back so use it carefully. Generally, you will be allowed £1000 in the first year, £1250 in the second year and £1500 in the third year. This does not mean you will be allowed £3750 in total... OHHHH no

Bank charges

• Does the bank charge for services? (Most banks will not charge for their services whilst you remain in credit or stay within an agreed overdraft limit)
• Will I receive interest on credit balances?

Graduate packages

• Does my branch offer preferential terms to graduating students? (Most banks do this. These include cheaper overdrafts and possibly loans to consolidate overdrafts and other debts)
• How long after my course has completed can I expect to receive preferential student terms?

Things to ask

• What can the bank do to help out if my first loan installment is late?
• What sort of credit card facilities does it offer?
• Does it charge commission on travel money? (several banks do not charge students)
• What savings facilities and incentives are on offer?
• Is there telephone banking and/or banking via the internet?

The difference between Debit and Credit Cards

Debit Cards

Debit cards are issued by the bank, and are directly connected to your bank account. Any money that you spend will be immediately debited from your account. You can withdraw cash from cash machines, you can go and swipe your card as payment in shop, or you can use them online on most shopping sites.

There are a few different types of debit cards, but they're all basically the same. However, some are accepted at more places than others. If you're using it in a shop or online, you need to make sure that the type you have is accepted there. Most student accounts come with a Maestro (formally Switch) or Visa debit card, and these are the most widely accepted.

Some debit cards can also be used as a cheque guarantee card. Obviously, for this you'll need an account that comes with a cheque book! Increasingly, banks are not issuing cheque books automatically as they're becoming an outdated method of payment; however, you may be able to request one if you think you'll need it.

Credit Cards

Credit cards can be issued by your bank, but are also available from other companies who only provide credit cards. You can apply for a credit card with any provider, although a lot of people choose to stay with their main bank.

Credit cards let you buy goods and services straight away and pay later, so it is really a short term loan. Credit cards are a convenient way of paying for goods and services but if you don't pay the bank in full within a certain time you will be charged interest on the amount you borrowed. This interest free period varies, but is generally up to 56 days. You have to be very careful to keep track of your spending when using your credit card as you can run up a debt without realising it. Taking out a bank loan might be a cheaper way of borrowing money from the bank in the longer term.

If you're buying anything over £100, then you get extra protection if you use a credit card. This stems from Section 75 of the Consumer Credit Act 1974, which says that if you pay for goods worth over £100 even partially on a credit card then the credit card company is equally liable with the retailer. So if the company goes out of business and you don't get your stuff, or you've had a problem with your statutory rights, you can go straight to the card issuer and get a refund!

You can withdraw cash from cash machines on a credit card. However, this should be avoided. It is very expensive, since companies will start charging interest from the second you make the transaction. They'll also charge a fee just for giving you the cash.

The APR refers to Annual Percentage Rate. It is intended to give people a more accurate idea of how much they are being charged when they borrow money. Generally, the lower the APR the less money you will have to pay back in interest. It is important to make sure you compare the APR of different credit cards when deciding which credit card to take out. Some card issuers may offer a low rate of interest for an initial period but this will increase at the end of this period.

Remember: if you pay back the minimum you're not only not paying back the initial bulk of debt, but you're also gaining "interest" (in a BAD way) from the bank. If you use your credit card, make sure you pay it off in full every month.

It may be useful to get a credit card for emergencies only. Make sure you know the PIN or it'll be of no use in such an emergency!

Banks

So you now have a small idea of the student banking system. Let’s have a look at the big players in this market:

Abbey

Abbey Student and Graduate Account

• Interest-free overdraft of up to £1,000 in the first year, up to £1,250 in the second year, up to £1,500 in the third year and up to £1,800 if you study for 4 years or more (once you’ve paid at least £500 into your account)
• Visa debit card
• When you graduate you still get an interest free overdraft

Barclays

Barclays Student and Graduate Account

• £200 interest-free overdraft on account opening, with further interest-free limits available up to £2,000.
• Apply to extend your overdraft over your interest-free amount up to £3,000, at 8.9% AER (variable).
• Visa debit card
• When you graduate you still get an interest free overdraft

Halifax (HBOS)

HBOS Student and Graduate Account

• Up to £2,750 interest-free overdraft for up to 5 years while you are a student.
• 25% off AA membership for a year
• Visa debit card
• When you graduate, you get an interest free overdraft for a year

HSBC

HSBC Student and Graduate Account

• up to £1,000 interest free overdraft in the first year, up to £1,250 in second year, up to £1,500 in third year, up to £1,750 in fourth year
• Maestro debit card
• Commission free travel money
• Up to 20% off Lonely Planet guidebooks, up to 40% off Dell PCs, and other discounts.

Lloyds TSB

Lloyds TSB Student and Graduate Account

• Up to £1,500 interest free overdraft - £500 for the first 6 months, £1,000 in months 7 to 9 then £1,500 after that.
• Free NUS Extra card, one year free mobile phone insurance, up to £75 cash paid into your account, free 1 year YHA membership, 35 free music downloads from eMusic, AA driving school buy-one-get-one free driving lesson worth up to £29.
• Visa debit card

Islamic Student Account

Lloyds TSB Islamic Student Account

As above, but this is a Shariah approved Islamic Student account - your money is not used in any interest-based business activities - reflecting the Islamic faith.

Natwest

Natwest Student and Graduate Account

• Interest free overdraft of up to £1,250
• Free 5 year railcard, free Microsoft LifeCam Vx-1000 when you apply online, 10% off books, DVDs and CDs at Waterstone's.
• Maestro debit card or Solo cashcard.
• Benefits available for 3 years after graduation

RBS

RBS Student and Graduate Account

• Interest-free overdraft of up to £2750.
• Various entertainment benefits with Royalties Membership Services.
• Free travel package consisting of 3-year railcard plus one month's free bus travel in Edinburgh, Glasgow or Aberdeen or £100 cash [applies to students who currently live in Scotland only].
• Benefits available after graduation

The Cooperative Bank

The Cooperative Student and Graduate Account

• £1,400 interest-free overdraft in year 1, rising to £2,000 in year 3
• Bank has an ethical policy determining where it invests your money.

Smile Student and Graduate Account - This is the online version of the Co-op

• Interest free overdraft of up to £2,000
• You have to make a deposit of at least £300 before you can start using your overdraft.
• Your money will never be used to support companies that pursue profits at the expense of their social and environmental responsibilities
• Visa debit card
• If you go over your limit without asking us, you pay interest on your excess overdraft at 25 % EAR with a £5 monthly fee.

Yorkshire Bank

Yorkshire Bank Student and Graduate Account

• Overdraft facilities of up to £3,000
• Free 2 for 1 Cinema Card to every student who opens a Student Account before 29.09.07.

If you get into trouble

Whichever bank you choose, bear in mind that you may need their support if you encounter a financial problem in the future. They will be more willing to assist you if you can demonstrate that you have a responsible attitude to borrowing and have not abused your account in the past. If you are ever in financial difficulty it is a good idea to contact the bank and discuss it with them. They'd rather have a responsive customer than someone slipping further into debt.

• Let your bank know as soon as possible. They may be able to help.
• If you are in severe financial difficulty you can apply for Access Funds and hardship loans. Check with your college for more details.
• You can get free confidential professional money advice from the National Debtline on 0808 808 4000 or from the Consumer Credit Counselling Service on 0800 138 1111.

Useful External Links

Comparisons of Student Accounts

Comparison of Student Accounts by moneyfacts

General Advice

British Bankers' Association: Advice on Student Accounts
BBC Working Lunch Summary
Guidance on choosing a bank from thesite.org

See Also

• Student Budgeting
• Student Finance Tips
• TSR Freshers' Pack