Look before you leap into the arms of a bank

Next week freshers will flock to university. Frances Howell strips away the gloss to discover what eager lenders are really offering students

Over the next couple of weeks, thousands of students will be flocking to colleges and universities throughout the country. Some will be leaving home for the first time. These "freshers" will be catapaulted into a whirl of induction courses, freshers' fairs, new faces and places, student parties and excess alcohol. For the first time many will also be in possession of a large cheque and will be looking for somewhere to put it.

The banks are all too aware of this. Eager to win not so much a measly student grant as the future pay cheque of a salaried professional, they will be bombarding wide-eyed freshers with offers of their services.

Banking is now a buyer's market for students. Commission-free travellers' cheques and foreign exchange are de rigueur for student account-holders, and free Access/Visa cards are common. All banks provide Switch or Delta debit cards. This is only the beginning of the freebies. Several banks are offering free gifts and cash incentives to new account-holders. These range from pounds 20-pounds 45 cash to cinema vouchers and even a driving lesson. Other banks take pride in the fact that they are not paying students to join them. The Co-operative Bank prefers to rest on its ethical laurels. And the Scots (Scottish students tend not to go into overdraft) take a strict monetary stance in trying to attract student business. "We were the first bank to go for a no-hype, no-bribes policy," says Lindsay Collinge of the Bank of Scotland.

So what should you choose? A gift of pounds 40 could seem attractive, but you may be ignoring hidden costs at that particular bank. For example, a student in credit may seem an anathema to the British stereotype. But Scottish banks, together with the Halifax, stand way ahead on offering good rates on current account deposits. The 4.25 per cent interest paid by Halifax will pay students who leave pounds 1,000 in their accounts for a year pounds 42.50.

But will you have these sums on deposit? The important thing is to choose a bank with services that suit you. If you think you will need a substantial overdraft facility, choose a bank that offers a large interest-free overdraft. If you think you may need more, then check the interest rates on authorised and unauthorised overdrafts.

TSB will charge a punitive pounds 3 for every day you are in unauthorised overdraft. You could find yourself paying the bank a considerable proportion of overdraft each year in interest.

There are other basics to consider. Is there a branch near you at college? Where are the cashpoints ? Watch out. Although a Visa sign on your card might enable you to use a wider variety of cashpoints, you will have to pay between 50p and pounds 2 to withdraw if the cashpoint is not one of your own bank's ATM type. So check where and when you can withdraw your money for no charge before you choose.

If you don't relish the prospect of visiting the branch when you might be in debt, then it could be worth choosing a bank that offers telephone banking. At the other end of the scale, Barclays provides a student business officer who will apparently meet you in the pub, having told you where you can get the cheapest pint.

Finally, the end of your course may seem a long way away, but the time will come when you leave, clutching degree but debt-ridden. It is worth checking now just how your bank will treat you then. Don't underestimate the debts you might run up. The average for students graduating last year was pounds 2,293.

Do consider alternative methods of financing your degree. Some 30 per cent of students graduating last year did part-time work during term-time and sponsorship is available for some vocational courses, usually engineering.