Go Direct News - Student banking - what's on offer for 2006/07 and what should students watch out for!

24 Nov 2024

Student banking – what’s on offer for 2006/07 and what should students watch out for!

Students will soon be getting their exam grades, seeking places at university and will then be on the search for their new student bank account. Michelle Slade, personal finance analyst from moneyfacts.co.uk takes a look at the 2006/07 student packages on offer and explains the key features students should be looking out for.

“Only three providers now offer account opening incentives, HSBC, Lloyds TSB and NatWest, with many other offering ongoing benefits in the form of commission free travellers cheques and a variety of discounted shopping deals. The Incentives on offer seem to have moved away from student ‘useful’ offers such as rail cards (still available at NatWest) to more ‘fashionable gadgets’ such as web cams and iPods.

“But however tempting these ‘goodies’ may be, it is important that students look at account features such as interest-free overdrafts and unauthorised overdraft rates to choose the account that offers best value for their particular circumstances. The potential savings on these could mean that you could possibly buy one of the advertised ‘freebies’ and still have cash to spare.

Interest Free limit

“Usually students are offered an interest free limit, which range from £1,000 to up to £2,500 from the main high street lenders. In some instances these will increase over the term of study for up to five years.

“While the higher limits may look attractive, it must be noted that some are not guaranteed, and once the application is processed the student may be offered a much lower figure.

Authorised Overdraft

“Often students are able to agree extension to their original limit in times of need, usually for a limited period of time. But what they must realise that, with the exceptions of NatWest and Royal Bank of Scotland, they will be charged interest on this borrowing, which can range from 7.2% to 9.9%.

Unauthorised Overdraft

“For many students this is the first time they have truly had to manage their money, and often within very tight margins. It is inevitable that, on occasions they may slip over an agreed limit, which can prove to be a very costly oversight.

“HSBC account holders seem to get the fairest deal in this instance, not applying unauthorised fees and charging their standard rate of interest (15.9%), compared with fees of £30 per day (max £90 pm) with Lloyds TSB, or interest of a whopping 32.92% at the Co-operative Bank.

Credit Interest

“Some accounts are paying interest of over 3% on credit balances, but with the majority of students unlikely to find themselves with a large credit balance, it does raise the question whether this really is much of a benefit for the student population. For example, a student lucky enough to maintain an average credit balance of £500 for a year will earn a measly £15 at 3%.

“When looking for their student bank account provider, they should also evaluate the services available. Most student accounts providers support a specialist advice service, with dedicated advisers trained in managing student and graduate finances, so it may be worth considering a bank with a branch local to their university.

“Most importantly students should choose an account which suits their longer term financial needs and should not choose an account purely based on the incentives dangled in front of them at the outset. “

Full information on student and graduate bank accounts can also be found in the banking best buys section on Moneyfacts.co.uk.

Company	Credit Interest	Max Free o/d per year	Auth Fees & interest	Unauth Fees & interest
Abbey Incentive: Specialist Advice Service and £20 cash for existing Abbey A/c holders aged 16 - 18	1.49%	Year 1 £1000 Year 2 £1250 Year 3 £1500 Year 4+ £1800	Nil £1 - 9.9% APR (0.79% pm)	£20 £1 - 28.7% APR (2.12% pm)
Barclays Bank Incentive: Discounts on shopping and leisure on website www.Barclaysandme.com	0.10%	Year 1 up to £1000 Year 2 up to £1250 Year 3 up to £1500 Year 4 up to £1750 Year 5 up to £2000	Nil £1 to £3K - 8.9% EAR (0.72% pm)	Nil £1 - 27.5% EAR (2.05% pm)
Co-operative Bank	-	Year 1 £1400 Year 2 £1700 Year 3 £2000	Nil £1 - 9.79% EAR (0.78% pm)	Nil £1 - 32.92% EAR (2.40% pm)
HSBC Incentive: A 512mb MP4 player or 10 CDs albums from CD Wow!. Available to first year students about to start their first undergraduate course. Free driving lesson and £15 off your next 5 lessons booked with BSM.	0.10%	Year 1 up to £1000 Year 2 up to £1250 Year 3 up to £1500 Year 4 up to £1750 Year 5+ up to £2000	Nil £1 – 8.0% EAR	Nil £1 - 15.9% EAR (1.24% pm)
Halifax Incentive: Discounts on Halifax World Explorer Travel insurance and Cardcare cover, commission-free travellers cheques and currency, discount on AA breakdown cover	2.00%	Year 1 up to £1750 Year 2 up to £1900 Year 3 up to £2100 Year 4 up to £2100 Year 5 up to £2100	Nil £1 - 7.2% EAR (0.58% pm)	£28 pm £1 - 24.2% EAR (1.82% pm)
Lloyds TSB Incentive: Free iPod shuffle for students entering higher education for the 1st time in academic year 2006/07. £500 must be credited to the account by 31.10.06.	0.10%	Year 1 £1500 Year 2 £1500 Year 3 £1500 Year 4 £2000 Year 5 £2000	Nil £1 - 7.4% EAR (0.60% pm)	£30 per day (max £90pm) £1 - 29.8% EAR (2.20% pm)
NatWest Incentive: 5 Year Young Persons Rail Card (worth £100) & apply online before 1.8 receive a free Windows Live Messenger webcam and headset	0.10%	Year 1 up to £1250 Year 2 up to £1400 Year 3 up to £1600 Year 4 up to £1800 Year 5 up to £2000	Nil £1 - 0.0% EAR	Nil £1 - 17.81% EAR (1.38% pm)
Royal Bank of Scotland Incentive: Discounts on shopping, entertainment and selected holidays. Commission free travellers cheques and currency.	2.00%	Year 1 up to £2500 Year 2 up to £2500 Year 3 up to £2500 Year 4 up to £2500 Year 5 up to £2500	Nil £1 - 0.0% EAR	£10 £1 – 29.84 EAR (2.20% pm)
Smile	3.00%	Year 1 £1000 Year 2 £1400 Year 3 £1800 Year 4 £2000	Nil £1 to £2K - Negotiable	£5 pm £1 - 25.0% EAR (1.8775% pm)

http://www.moneyfacts.co.uk/banking/default.aspx

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

Go Direct.co.uk is a trading style for website purposes of Go Direct UK Ltd.

Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600

We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £349