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Last Updated: Friday, 13 August, 2004, 13:42 GMT 14:42 UK
Choosing the right bank
By Dan Roan
BBC2's Working Lunch

Bank
Student life involves a wide range of choices and opportunities, not least in the area of personal finance.

Choosing where to put your money is one of the more important decisions, so take time to consider which bank is right for you.

You'll need a bank account in which to put your student loan, and to help you manage your day-to-day finances.

But remember that banks are desperate to attract students because they're seen as potential high-earners, and long-term customers.

As a result, most banks try to tempt new student customers with attractive gifts and incentives, so take time to see what each is offering before signing up.

"You have to weigh all the different perks up," says Nikki Foster, a financial adviser with Chase de Vere.

"Generally most of the major banks offer similar deals for students so it can almost boil down to what free gift they're offering.

"Some hand out cash, but others will offer railcard discounts for instance, which some young people will find especially useful."

You have to weigh all the different perks up.
Nikki Foster, Chase de Vere
This year, you can get a free curry with Lloyds TSB.

But the Bank of Scotland is among those offering no incentives at all.

However, remember that the freebies should be treated as a bonus, and not necessarily the main reason for choosing the bank itself, so consider the following more fundamental issues.



Most students will fall into debt, so it's crucial your bank can offer an interest-free overdraft.

These will vary in terms of the amounts on offer but most start at about 1,000 in your first year, rising to 2,000 in year four or five.

But check what will happen if you accidentally go over your limit. The Royal Bank of Scotland will charge 29.8% for an unauthorised overdraft. That compares with 17.81% at NatWest.

"The one thing to be very, very careful of is don't go into unasthorised borrowing because the penalties are very, very harsh," warns Melanie Stewart of Moneyfacts.

You can, of course, arrange an authorised overdraft. Charges are cheaper - as little as 0% - but again vary enormously.

Cashpoints

Ask if the bank offers an internet or telephone service, foreign currency, and crucially, check to see which banks have branches or cashpoints on your campus or near your university.

Find out if the bank has a student adviser to help you with your finances, and what services are on offer for when you leave university and start your first job.

Lots of questions, but don't be afraid to ask them. Visit your local bank branches or log on to their websites; all will have details about what they offer students

Opening the account

When you have decided which bank you want, you'll need to open your account.

Some ID will be required in order to prove that you are a genuine student, and most banks will ask for a letter of acceptance from the university, or a National Union of Students card.

Some banks like Barclays insist on your student loan cheque being put into the account before handing over any freebies.

Wily students have opened more than one account in the past to get all the free goodies. But now you might find that you are asked to agree that you will only take up one bank's student service.

Using your student account

Bank cards are probably the handiest way to manage your cash, and essentially serve two purposes:

  • to withdraw money from your account using a cash machine

  • to guarantee a cheque.

    When paying for goods by cheque, you'll usually be asked to produce a guarantee card to ensure the payment of the cheque.

    Student at cash machine
    Cards are a good way for students to handle cash
    Basically, the card guarantees that your bank will pay the required amount of money from your bank account.

    Effectively there are two different types of bank card.

    A debit card works in the same way as a cheque, in that it takes money directly from your current account.

    Debit cards are handy, as they're swiped through a scanner.

    The system usually then checks your account to ensure that the funds are available, and if so, the money is debited from your account and all you have to do is sign the slip.

    Credit cards

    But what about credit cards? Some students can't wait to get their hands on one and start spending but ask yourself why you need one before taking the plunge.

    Credit cards are perhaps most useful in emergencies, for more expensive purchases, buying tickets over the phone or the internet and when travelling abroad.

    But remember that if you do use the credit facility the card offers, you will be charged, sometimes at very high rates.

    I hate to see students using credit cards.
    Nikki Foster, Chase de Vere

    Credit cards are dangerously seductive; they make handing over your cash somehow easier in that you are only confronted by the amounts you've spent each month.

    "I hate to see students using credit cards," says Nikki Foster.

    "My advice to young people is stay clear of them; most students will be in debt during their time at university, and the last thing you need is to be charged high rates of interest."

    But if you have your heart set on a credit card make sure you shop around; if you transfer your balance to a new credit card you should get a discounted or even zero interest rate on the money you owe, usually for the first six months.

    But be warned: this rapidly rises to 20% or more once you are an established customer.

    It's good to talk

    Being a student isn't easy when it comes to money but make use of the different services on offer, and try to establish a good relationship with your bank's student adviser.

    Remember that banks see you as a valued customer and will usually want to try to help you with your finances.

    "When you're a student you spend a lot of time worrying about finances so get help by speaking to someone on a regular basis at your bank," says Nikki.

    "It pays to have a good relationship with your bank, especially if you ever need to extend your overdraft!"


    WHAT THE HIGH STREET BANKS ARE OFFERING






  • WATCH AND LISTEN
    Melanie Stewart of Moneyfacts
    "Look at the whole package, not just the incentives"



    SEE ALSO:
    Banks & Building Societies
    21 Jan 03  |  Working Lunch


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