Find a good home for your overdraft

How do you choose your bank? Simon Read assesses your options as the big lenders compete for your custom; That goodwill will disappear if you start abusing your overdraft

Whether you are a student or a business tycoon, finding the right bank can take as much luck as winning the Lottery. All the big four banks have similar student packages and student advisers, so how can you differentiate between them? Parents can help, of course, but you should make your own decision.

Many people choose banks for the wrong reasons. One of the most popular is for students to pick the bank which their parents use. In theory this makes sense. If a parent has had a good relationship with a bank for years, that is likely to stand you in good stead. But that goodwill will disappear if you start abusing your overdraft facility. And who is to stop the bank manager or staff having a quiet word with your parents about your financial problems? Banks say that the customer relationship is sacrosanct, but in practice it can be a different story - as Wendy Nevin discovered.

As a successful entrepreneur, running three shops and a business centre, she is in and out of her local bank in Birmingham two or three times a week. When her son Stevie went to art school, he opened his account at the branch before leaving home.

"One day the assistant manager came over to me and said: `How's Steve? If you talk to him in the next day or two, ask him to give me a ring.' I panicked, and rang my brother in London to go round to see him the next day. Stevie was horrified, and went straight to the cash machine to check the balance, then rang the bank to find out what was going on.

"It was all a false alarm. When he had opened the account he had scribbled his normal signature `S Nevin' - but once he got to art school it transmogrified into `Stephen J Nevin' in a classy sort of calligraphy. They just wanted him to confirm the new signature for their records!"

Experience suggests that as a student, you should pick a bank that seems to offer the best deal, irrespective of your parents' arrangements. Convenience is the second factor for many students when picking a bank - but plastic cards and hole-in-the-wall machines mean you can get access to your funds almost anywhere, so the need to have a branch on your doorstep is not important. However, you may need to pop into the branch regularly to discuss your growing overdraft, so don't choose a branch too far away. An understanding ear is more important than convenience.

Ask more senior students to tell you who are the friendly and understanding bank staff. Make an appointment with those recommended and decide for yourself if you want to take the relationship further. Just because you have an interview doesn't mean you have to sign on the dotted line.

If you open a NatWest Student Account before 28 November 1997, you'll get pounds 35. If you register with NatWest's Student Banking Service, available in selected branches near universities, you'll get a bonus of pounds 15, bringing the grand total to pounds 50. You can do what you like with this money - treat yourself or save it.

Barclays also offers pounds 50, but pounds 25 is credited to a credit card and pounds 25 to a current account. Midland offers pounds 50, or a four-year Student Railcard worth pounds 64. At Lloyds, you'll get an opening cash gift of pounds 30, or pounds 20 and a three-year National Express Travelcard, worth pounds 19 - plus an extra pounds 5 if your parents have an account with the bank. TSB, owned by Lloyds, is giving away pounds 50-worth of Our Price vouchers with every 16-20 Interest Cheque Account opened. However, this account is just aimed at young people and offers no specific benefits to students.

What advantages are there? All the major banks offer free advice from student counsellors or student advisers, plus graduate services, to take you through to your first job. More materially, they offer preferential borrowing rates: Midland, for instance, charges just 1 per cent above the bank's base rate (currently 6.75 per cent) on agreed borrowing limits.