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.