If you're off to college or university later this year, be sure to pick the right current account. We review the deals on offer.
When I arrived at London University in 1986, one of the first things I did was to open a student bank account. However, I didn't shop around for the best account to suit my needs: instead, I blindly opened an account with NatWest, simply because it had a sub-branch and cash machine on campus.
Luckily, this was in the days before student loans and tuition fees, so I received a full student grant throughout my three-year course, worth around £2,500 a year. Alas, I overspent so much and breached my overdraft limit (and credit-card limits) so often that I had the home number of my bank's student liaison officer -- and called her frequently!
Now that I'm twenty years older and a great deal wiser (well, at least financially speaking!), I can look back at my youthful recklessness and smile ruefully. It's clear to me now that the bad financial habits which I learned as a student persisted for many years afterwards, leaving me broke right into my thirties.
Hence, it's crucial to get your student finances off to the right start, so begin by choosing the right bank account. Without generous parental support, and thanks to student loans, your life as an undergraduate (and afterwards, as a graduate) is all about minimising your debts and the interest on them. Thus, for most students, the best current account will be the one which charges the least for big-time borrowing.
According to independent financial researcher Moneyfacts, these are the leading student bank accounts in Great Britain. (I've left out the Northern Irish banks plus Clydesdale Bank and Yorkshire Bank, as these aren't country-wide banks). Note that I've haven't included the credit interest rate paid by each account, as this will be all but irrelevant to most students (as should any freebies or gimmicks on offer). To be frank, finding the largest interest-free or cheap overdraft should be your biggest concern!
Also, some of these deals will change over the coming weeks as banks upgrade from their 2005/06 to their 2006/07 offers (O/D means "overdraft"):
Bank | Maximum | Unauthorised |
|---|---|---|
Abbey (2005/06) | Year 1: 1,000 | £20 |
Barclays (2005/06) | Year 1: 1,000 | Nil |
Co-operative Bank (2006/07) | Year 1: 1,400 | Nil |
HSBC (2006/07) | Year 1: 1,000 | Nil |
Halifax/Bank of Scotland (2005/06) | Year 1: 1,750 | £28 pm |
Lloyds TSB (2006/07) | Year 1: 1,500 | £30 per day |
NatWest (2006/07) | Year 1: 1,250 | Nil |
Royal Bank of Scotland (2005/06) | Year 1: 1,250 | £10 pm |
Smile (2006/07) | Year 1: 1,000 | £5 pm |
Of the above accounts, I like the look of the NatWest account, as it offers an interest- and fee-free overdraft averaging £1,416 over the first three years, plus it charges no fees when you exceed your overdraft limit, and a half-decent rate on unauthorised borrowing (and the free railcard provides useful travel discounts). However, it may be worth waiting to see the 2006/07 deals from Abbey, Barclays, Halifax/Bank of Scotland and Royal Bank of Scotland before diving in.
So, choose your first current account carefully, because finding the right account could leave you hundreds of pounds better off during the three drink-fuelled years of a typical degree course. Finally, don't be pressured into opening a bank account at your college Freshers' Fair, as banks pay large "bribes" to Student Unions in order to buy exclusive access to these events!
More: Use the Fool to compare bank accounts, compare credit cards and compare savings accounts.
Disclosure: Cliff owns shares in HBOS and Lloyds TSB.