Cash lures cut back on student bank accounts: Sue Fieldman finds the banks putting the emphasis on service rather than free offers

THE BANKS are cutting back on cash incentives to tempt students to open a bank account. Some have withdrawn the cash carrot altogether, others have dramatically reduced the amount on offer.

The banks claim they want to dispense care rather than cash, and are highlighting the advice services included in the student packages. In reality, doling out wads of cash to students when the banks are already losing money is hardly good business practice.

National Westminster, the biggest player in the student market, announced its 1992 student package this week. Last year it was offering a cash incentive of pounds 35. This year new students are being tempted with pounds 25.

A NatWest spokesman said: 'It is at this level because of the competitive environment. It is still the biggest cash incentive'.

Midland has reduced its cash offer from pounds 30 to pounds 15. Royal Bank of Scotland is offering new students pounds 20 instead of pounds 35.

Barclays and Bank of Scotland have withdrawn their cash incentives altogether. A spokesman for Bank of Scotland said: 'In the current economic climate we decided the emphasis should be on sympathetic and understanding banking contacts rather than just a one-off money payment.'

However, a one-off money payment brings a lot of sympathy, understanding - and books to a hard-up student.

Bank of Scotland has one of the best credit interest rates on offer. It and TSB both pay 7.5 per cent gross. Bottom of the class is Royal Bank of Scotland, which pays a meagre 1.5 per interest gross on balances under pounds 500.

For students who think they will overdraw, it pays to look carefully at the overdraft facilities. Royal Bank of Scotland provides an interest-free overdraft only for the first year of study. After that the interest rate is negotiable.

All the other banks have the interest-free facility for the whole of the student's course. NatWest insists that the student ask for the overdraft to be converted into a personal loan at the end of the first year 'to encourage students to talk to the bank rather than drifting into an overdraft situation'. The loan remains interest- free up to pounds 400.

If a student exceeds the pounds 400 limit NatWest charges a fixed interest rate of 12 per cent. Students with TSB are clobbered for 'the usual overdraft rate', whereas Midland, Barclays and Bank of Scotland have a concessionary rate of 1 per cent over base. However, Barclays offers only a pounds 300 interest-free overdraft and Bank of Scotland is even more stingy with pounds 200.

If you are swayed by freebies, the best package of travel perks comes from Lloyds. The runners up are Abbey National and TSB, which are offering cut-price driving lessons.

A spokesman for the National Union of Students advises: 'The real freebies - the overdraft - are what you should be looking at. If you think you are going to run into serious trouble, go for a bank you can visit. You should also avoid credit cards unless you can pay them off'.

CLARE MAYHOOK is waiting for her A level results. She hopes to go to Exeter University to study history and society.

Clare has a bank account with Barclays which she opened as a young saver. She says: 'I will see what Barclays has to offer students, and if it is not good enough I will shop around to see what I can get with the other banks.

'I will also take into account which bank is on the campus.

'What sways me is which bank pays the highest interest.

'I hope not to overdraw, but if I do I will want a bank that offers the best rates on the overdraft.'

Clare adds: 'I do not want a credit card as it is too much hassle.'

JONATHAN COHEN, who lives in north London, has just finished his first year at Edinburgh University. When we interviewed him in August 1991 he was awaiting his A level results. He had not decided on which bank would have his student account.

Jonathan says: 'I kept my Abbey National savings account which I had before, and I opened a Midland student account at home ready to go to university.

'Then I found there was only one Midland in the whole of Edinburgh, so I also opened a Royal Bank of Scotland account. I got my pounds 35, but that has now gone down a lot.

'I have an overdraft facility. I used it a couple of times, but I ended the year in credit.'

----------------------------------------------------------------- STUDENT GRANTS AND LOANS ----------------------------------------------------------------- IN LONDON OUT OF LONDON ----------------------------------------------------------------- Living away from home GRANT pounds 2,845 pounds 2,265 LOAN pounds 830 pounds 715 Living with parents GRANT pounds 1,795 pounds 1,795 LOAN pounds 570 pounds 570 -----------------------------------------------------------------

(Photographs omitted)