Be wary of bank bearing gifts: Students should not jump too quickly at inducements to open an account, says Neasa MacErlean

STUDENTS preparing to go to university for the first time next month are being offered a range of gifts to open accounts with different banks.

But they should not be influenced too much by the pounds 10 record voucher from Barclays, the clock radio from the Northern Bank, Lloyds' pounds 16 Young Person's Railcard or the other goodies on offer from the rest. Nor should they be put off by the 'no hype and no bribes' position of the Bank of Scotland.

Far more important for many students will be a bank's authorised overdraft rate. The National Union of Students estimates that, on average, students have debts of nearly pounds 1,700. Barclays in Cardiff says that about half of its undergraduate customers take out an overdraft. It routinely grants facilities of pounds 400 for each academic year. Alan Kitto, its student officer, said: 'We would not be alarmed to see a final-year student with an overdraft of between pounds 1,000 and pounds 1,200.'

Overdraft rates vary significantly between the large banks and building societies. NatWest, for instance, currently charges 9.3 per cent on authorised overdrafts - about 2 per cent more than its competitors. On unauthorised overdrafts, Barclays charges about half the rates of its rivals.

The big four banks all offer interest-free overdraft facilities of up to pounds 400. NatWest goes on to increase this to pounds 500 in the final year. The Royal Bank of Scotland offers slightly less, no free overdraft arrangement after the first year.

All the banks offer free banking, although the Bank of Scotland has introduced charges for direct debits and standing orders. All the banks and building societies offer interest on current accounts that are kept in credit. But the rates of interest are low - ranging from 0.25 per cent at the Royal Bank of Scotland to 4 per cent at TSB and the Bank of Scotland.

Most banks will allow students a credit card with a limit of about pounds 250. Lloyds, Midland, NatWest, the Northern, the Royal Bank of Scotland and the Bank of Scotland will also issue commission-free traveller's cheques and currency to students.

Despite their straitened circumstances, students appear to be surprisingly good at managing their finances. Barclays in Cardiff has about 3,000 student accounts, of which only about 15 are 'seriously beyond help'. Alan Kitto says that at some stage about 30 per cent of students will 'accidentally' go overdrawn without permission by a matter of a few pounds. But only about 1 per cent will run up an unauthorised overdraft intentionally. 'The main problem for students is a fear of coming in and talking to us about their problems,' Mr Kitto added.

Despite their lack of funds, students are highly valued by the banks because of their earnings potential. NatWest is currently the market leader with 40 per cent of students banking there. Barclays has 26 per cent and Lloyds and the Midland attract about 20 per cent each. (About 6 per cent of students have more than one account.)

The most important factor in choosing a bank will for many students be geographical. The campus at Reading University, for example, has only one bank, Lloyds. Opening a bank account now without finding out how far the branches actually are from your university could lead to a lot of long walks over the next few years.

IFA Promotion is sending out free copies of 'In For A Penny', a guide to money management for students. Copies available on 0483 461461.

----------------------------------------------------------------- HOW BANKS REACH OUT TO STUDENTS Incentives and charges for overdrafts ----------------------------------------------------------------- Bank/Society Incentive Int % Overdraft charges % Free Auth Unauth Abbey National --- 0.5 --- 12.5 34.4 Bank Scotland --- 4.0 pounds 400 11.5 26.8 e Barclays Bank pounds 10 1.0 pounds 400 7.2 13.6 voucher Halifax --- 4.25 pounds 300 10.0 28.9 Lloyds pounds 16 1.0 pounds 400 7.1 26.8 e railcard Midland pounds 25 3.0 pounds 400 7.2 31.8 (to 30/9) a NatWest pounds 25 2.0 pounds 400 c 9.3 33.8 Northern (NI) Phonecard, 0.5 --- 8.0 20.74e radio Royal Bnk Scot pounds 10 0.25 b pounds 400 d 7.0 -- (to 30/11) TSB Cinema, 4.0 pounds 400 7.2 29.8 vouchers All rates above are variable and are shown gross; a) pounds 15 to 1/11/93; d) Rates are tiered; c) Rises to pounds 500 in year three; d) First year only; e) Rate shown is APR, as monthly fees of pounds 2.50 to pounds 7.50 are charged for unauthorised overdrafts. Other rates are Effective Annual Rate. ----------------------------------------------------------------- Source: Moneyfacts -----------------------------------------------------------------

(Photograph omitted)