Banks step up the battle for student clients

BANKS and at least one building society are trying to win new student accounts by outbidding each other with interest-free overdraft facilities.

Halifax Building Society has made the most determined bid to tempt students into opening one of its Maxim accounts by offering a pounds 1,000 interest-free overdraft facility to any student.

Mike Blackburn, chief executive at the Halifax, said: 'Our student customers have helped design this new version of Maxim. They now have a first-class deal from us.'

Agreed overdrafts above the pounds 1,000 limit will be charged 6.2 per cent. Students receive 3.75 per cent gross interest on any credit balance in their Maxim accounts.

Lloyds is increasing its interest-free overdraft for third- year students from pounds 400 to pounds 800, and for second-year students to pounds 600. The bank has also cut interest rates on its agreed overdrafts from 7.1 per cent APR to 6.4 per cent APR.

As a further incentive, Lloyds is offering a choice of either pounds 25 in cash or a Young Person's Railcard, worth pounds 16, together with a pounds 15 Virgin music voucher.

Dennis Holt, the bank's general manager in charge of personal banking, said: 'Students need all the financial help they can get.'

Students would be encouraged to discuss their budgets with the bank before an overdraft is granted.

Lloyds has also launched a Choice Account for 18-year- olds leaving school to start work or a vocational course. It restores the pounds 50 safety net, removed recently, before charges are levied on overdrafts. After one year, the new pounds 10 overdraft 'buffer' will apply.

Midland is offering a pounds 500 interest-free overdraft to first- year students, rising to pounds 600 in the second, with pounds 700 in the third and any subsequent years.

It is giving pounds 25 in cash to students opening a new account before October or at their freshers' fairs. Borrowing agreed above the free overdraft limit will be charged at an annual rate of 1 per cent over base, presently 5.25 per cent.

Access and Visa cards with a pounds 500 overdraft limit and no card fee are also available.

A Midland spokesman said research among its own students showed 35 per cent of first-year students were overdrawn by the end of summer term. This rose to 43 per cent among second years and 60 per cent of final-year students.

Both banks beat Barclays Bank, which last month increased its free overdraft limit for final-year students to pounds 700, while retaining the pounds 400 maximum for first and second years.

TSB this week launched its own package, which includes interest-free overdrafts of up to pounds 400, irrespective of year, plus discounts on cinema visits, Ravel shoes, Athena posters, Superdrug toiletries and a range of sports and other magazines.

Overdrafts above pounds 400 are at an annualised rate of 7.1 per cent. Students also receive 3.5 per cent interest on savings in their accounts, paid annually.