How `free' is free banking?

If you exceed your lending limit, or use a credit card heavily, the charges will soon mount up

Opening a student account is easy, but how can you ensure you get the best from your bank? For starters, you must recognise that despite the "free banking" label, you have to pay for most services a bank offers, just as you have to pay for your shopping. Once you get your head round that idea, it is relatively easy to find the account that suits your needs simply by shopping around in much the same way that you would look for a stereo.

So what are you shopping for at the banks?

Borrowing is likely to be high on the list for most students. When you open a bank account, you will suddenly have access to several ways to borrow money. Deciding on the best method is important in reducing the costs. The easiest way to borrow is to use a plastic card. When you open your bank account you will probably be offered both a credit and a debit card. Both can easily get you into debt -but at different costs.

A credit card - which will usually have the Mastercard or Visa logo on it - is purely a way to borrow money. You will be given a credit limit - the maximum amount you can borrow - and be charged anything up to an annual interest rate of around 23 per cent.

A debit card - which will feature either the Switch or Delta logos - is simply a way to spend the cash in your current account. Of course, once you are in the red that means you will be borrowing money through an overdraft, although it will be cheaper than through a credit card. As a student, you would be charged around 8 per cent so long as the overdraft has been agreed beforehand.

If you go overdrawn without permission - an unauthorised overdraft - you will incur a hefty penalty interest charge, anything up to 30 per cent. The good news is that with most banks you can have a limited overdraft free of charge. At Barclays, you can borrow up to pounds 1,000 in your first year, and more in subsequent years, without paying for the privilege.

On the spending side, a bank account makes it easy to pay monthly and quarterly bills. Most of the utility companies - gas, water, electricity, phone - will encourage you to pay by direct debit or standing order, which allows the money to be taken electronically from your account. This means giving a company permission to take money from your account. The amounts change as your bills rise and fall according to your usage of the service. Standing orders are more suited to fixed bills, such as television rental, as you instruct your bank to pay regular amounts to a named company.

Cheques can be used to pay bills by writing, as well as paying for goods in shops, but you will often be able to use your Switch or Delta card instead. You can also use these cards to withdraw money from cash dispensers. There is no charge for using machines operated by your own bank, and there are some arrangements that will allow you to use those of other banks. Ask at your branch - or look at the symbols on the machines.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Media

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Database Executive - Leading Events Marketing Company - London

£23000 - £25000 per annum + 25 days holidays & pension: Ashdown Group: Databas...

Recruitment Genius: Publishing Assistant

£14000 per annum: Recruitment Genius: A fantastic opportunity has arisen for a...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before