Spotting the difference in the big banks' student packages: The clearers have spelt out their offers. Neasa MacErlean looks at the small print

----------------------------------------------------------------- What's on offer for students this year ----------------------------------------------------------------- Barclays Lloyds Midland NatWest RBS TSB Free overdraft limit pounds 400* 400 400 400 400 400 Authorised overdraft: interest charge (effective annual rate) 7.1% 11.3% 7.2% 9.3% Neg 7.2% Unauthorised overdraft: interest charge (annualised percentage rate) 13.6% 26.8% 31.8% 33.8% 29.7% 29.8% Cost of letter when account goes beyond agreed limit Nil 10 Nil Nil 15 15 Free banking guaranteed for full period of undergraduate study No Yes Yes Yes Yes No Current acct gross interest rate 1% 1% 3% 2% 0.25- 1.5% 4% ----------------------------------------------------------------- * pounds 500 in final year First year only -----------------------------------------------------------------

THE interest rate on student loans that track inflation is to fall to 1.2 per cent in the academic year starting in September.

The government-owned Student Loans Company, which runs the scheme, said it was a 'signficant fall' from the previous rates of 3.9 per cent for the 1992-93 academic year, and 5.8 per cent the year before.

Four out of five university and college students end the academic year in debt, according to a survey conducted by Barclays Bank and the National Union of Students. On average they owe pounds 1,672.

With grants frozen, debts are likely to carry on rising, so choosing the right bank is increasingly important.

On the surface, the banks' student packages may look indistinguishable but there are several features that could make a big difference.

The leading banks all offer free overdraft facilities of pounds 400. National Westminster offers a slightly better package, allowing final-year students pounds 500. Royal Bank of Scotland's pounds 400 free overdraft extends only to the first year.

Most of the banks go in for an element of gimmickry. The TSB proffers four free MGM/Cannon cinema tickets, Barclays gives a pounds 10 record voucher, Midland and NatWest give pounds 25 in cash, RBS credits pounds 10 to the account and Lloyds gives each student a pounds 16 Young Persons Railcard.

All offer cheque books, cheque cards and automatic teller machine cards. Midland, Lloyds, NatWest and RBS also throw in commission-free travellers' cheques and foreign currency.

The big banks offer free banking to students, as well as to their other customers, but there are differences in the guarantees they make about the future. The signs are that banks will reintroduce transaction charges for customers, possibly including students. Charges can easily run into treble figures over a year, especially for the overdrawn.

Midland Bank offers the best guarantees, promising students they will not have to pay charges during their undergraduate or postgraduate career. Royal Bank of Scotland and NatWest make the same promise but only for undergraduate courses. Barclays and TSB make no guarantees but a TSB spokeswoman said: 'Nothing is set in tablets of stone. But what we'd be looking to do is to exempt all young people.'

Students who think they will need to go beyond their pounds 400 limit will find significant variations in overdraft rates. Barclays, TSB and Midland charge about 7.2 per cent for authorised overdrafts. NatWest charges 9.3 per cent, Lloyds 11.3 per cent.

Deeply irresponsible students would be better off throwing in their lot with Barclays. It charges 13.6 per cent APR on unauthorised overdrafts - under half the rate of most of the others. NatWest is the most expensive at 33.8 per cent APR.

All the banks are eager to cultivate students. So they are paying more attention to developing good relations. Students who overdraw will usually be identified quickly and asked in for a chat.

Barclays, for example, has 150 specialist student business officers. They are more or less forbidden to wear suits and during freshers' week will be in jeans and T-shirts. Alan Kitto, the 24-year-old student officer in Cardiff, said: 'There's no formality in this branch.'

(Photograph omitted)