A degree in banking

Students: financial survival at university can mean weighing political ideals against the leading accounts, and finding funds for foreign study

Best buys among student bank accounts are those from Halifax, Midland and TSB, says the Consumers' Association in this month's Which? magazine.

In making its ratings, Which? says it ignored the freebies on offer - including up to pounds 50 in cash - and instead considered overdraft deals and after-graduation packages.

The point Which? makes is that, given high levels of student debt, low overdraft charges while studying and after graduation can more than cancel out any difference in freebies.

True, but students should also remember they always have the option of switching after graduation or even in mid-study, and may be tempted to do so just because of some of the freebies and incentives on offer.

Student banking packages are very generous by the standards of the deals on offer to the rest of us. And the deals are better this year than ever before - not just in the value of the freebies but in terms of the increased size of interest-free overdrafts: up to pounds 1,500 in some cases. Students also benefit from preferential interest rates on authorised additional overdrafts - in many cases just a small margin above the base lending rate (ABR) of 5.75 per cent.

The banks see students as a long-term investment - catch them now with a subsidy because they will be the high-earning professionals of the future who will then yield the big profits.

The interest paid on credit balances, while in many cases quite good, is likely to prove pretty much an irrelevance for most students after their first flush weeks. On average, students will spend more than pounds 4,000 during this academic year, according to the National Union of Students. That may not sound much but it will still leave many students short; grants and loans amount to little more than pounds 3,500 for the year, less outside London. The average graduate ended university pounds 3,000 in the red this year.

Nevertheless, some students may find they are encouraged to pick their bank on more than purely financial issues. A student action group called Lloyds and Midland Boycott (Lamb), based at Manchester University, is planning a series of protests against these two banks to undermine their efforts in getting students to sign up. Lamb is upset at the amount of Third World debt Lloyds and Midland are still sitting on - more than other UK banks - and also wants to see them adopt more "ethical" lending policies in the future.

Of course, students could simply open accounts with the "unethical" banks, grab the goodies and interest-free overdrafts and then immediately switch to a more "ethical" bank. Or, for the serious freebie collectors, anecdotal evidence suggests that it may even be possible to do the rounds of the banks. Past students claim it is possible to pick up a range of freebies simply by transferring a lump sum from one to the next and telling the bank the money is a parental contribution.

q The National Union of Students has a free guide, 'A Student's Guide to Better Money Management'. Telephone 0171 272 8900.

Midland Bank has produced a free guide, 'Coming to terms with Money', aimed at helping students manage their finances. Available free from Midland branches.

The banks want your business

Freebies Interest if Interest-free Authorised

in credit overdraft overdraft

Barclays pounds 25 & pounds 25 2.00% Years 1-3 1% ABR

with credit pounds 1000-pounds 1500

card

Co-op None 0.12% pounds 500 19.56%

Halifax Free CD 3.10% Up to pounds 1000 6.20%

Lloyds Railcard & 1% Years 1-5 7.40%APR

pounds 20 voucher, pounds 500-pounds 1500

or pounds 30*

Midland pounds 40 & pounds 10 BT 2.23% Years 1-3 1%ABR

chargecard* pounds 750-pounds 1500

Nat West pounds 20 & pounds 15 with 2% Up to pounds 1000 9.30%

credit card

Royal Bank None 2.90% Years 1-3 3-6%ABR of Scotland pounds 600-pounds 1000 (negotiable)

TSB pounds 30 voucher 3.00% Years 1-3 6.25%

pounds 500-pounds 700

* Incentive offers available only to freshers.

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