October is nearly upon us. It’s that time of year where across the UK, thousands of wary 18-19 year olds are wandering, partially attached to their keen parents, into high street banks – ready to sign on the dotted line for a student current accounts, and by extension; their first step towards financial independence.

According to ThinkMoney – 39% of people have never changed their current account. When you reflect on this point; it becomes clear that the choice of student current account is critically important. There is almost a coin-flip chance that you will stick with this account through thick and thin for the rest of your years. For such a long term relationship, it seems obvious the choice of partner is very important, and worth a fair amount of research and thought into the selection process.

There’s More to a Student Account than a Railcard

In return for a 30-year customer, then, it is quite humorous to see how cheaply our loyalties are ‘bought’! Discount card? A 3 year railcard worth £75? Free fridge magnet?

The range of sign-up bonuses are vast. Each major high street bank aims present the best range of benefits to potential customers, like a shop window at Christmas time. I’d like to talk through the different types of bonuses available and whether these are worthy of your attention.

Discount Cards. Discount cards are fairly ubiquitous these days, with the NUS Extra card holding the top position. NUS Extra costs only £12 – so whilst the appeal of these cards is high, the real value of the card being attached to the account is £36 over the length of the course.

Young Persons Railcard. It’s a similar story with the railcard – handed out with NatWest student accounts. However this card is worth £30, so you’re making a £90 saving by applying for the account. Naturally you do have to use the train to make this card pay its way, but rail is one of the best forms of transport for students, so I’ve yet to find someone who hasn’t used theirs.

Interest Free Overdraft. Often promoted as the headline benefit of the student account – interest free overdrafts can ease the burden on students. With the rising cost of student accommodation – most students find that their maintenance loan & grants do not cover both the cost of housing and living costs such as groceries, entertainment and textbooks. As a result, many students take up part time work, but for those who decide to dedicate their time to study; the deficit must be filled by either parent, credit card, personal loan or overdraft.

Overdrafts are usually automatically arranged and available for when you need them, and the allowances don’t typically end when you graduate. Rather – the interest free element rackets down gradually over a few months or years after graduate, providing an incentive to gradually pay back any balances without incurring a charge.

Of all the benefits that student bank accounts can offer – the overdraft is far more valuable. As an example – a £1,750 overdraft utilised over a 3 year period could save £525 in interest, if the alternative was a personal loan with a 10% interest rate. Many students draw down their account and transfer the funds into a high-interest bank account, and earn a few hundred pounds over the course of their degree.

Not a Level Playing Field

As the overdraft is probably the most important benefit, one would expect that banks compete closely on size and length of these arrangements. However you’d be surprised at how much variation there is within the ‘Big 5’ high street chains. Some offer an interest free overdraft of £1,250 whereas others offer as much as £3,000. Discover choices for student bank accounts by shopping around online and see how the obvious (and less obvious) bank choices size up for yourself!

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