Student finance: find an account you can bank on

It may seem the least of your worries when starting a new life at university, but picking the right bank account could prove critical a few years down the line.

Banks are keen to sign up students and all sorts of incentives will be thrown your way, from retail discounts to free travel cards.“Don’t be swayed by freebies and gimmicks,” says Claire Evenden, student finance adviser at University of Greenwich. Look at the size of the overdraft, the interest rates and the charges – how much are they and when they are taken?”

HBOS (which includes Halifax and the Bank of Scotland) offers the largest interest-free overdraft of up to £3,000 (see table below). In addition – even though it may seem a long way off now – it’s worth checking what happens on graduation: look for accounts that offer some kind of transition to post-student life by gradually phasing out the interest-free overdraft, or you could be in for a nasty shock.

A number of banks also offer student accounts that comply with shariah law: Lloyds TSB, for example, has an Islamic student account that neither charges nor receives interest. Make sure you get the most out of your bank: sign up for internet and telephone banking so you have 24-hour access to your account rather than waiting for statements to arrive. Some banks offer free text alerts to let you know what your balance is and when you’re nearing your overdraft limit, so make sure you sign up.

“Often the people who get into trouble are those who don’t know what’s going on or bury their heads in the sand,” says Barbara Wooden, senior welfare adviser at Northumbria University. “When you don’t have much money, it’s very important to keep a close eye on what’s going in and out so you can take action if needed.”

Plan your expenses and set up monthly standing orders to pay bills such as rent and utilities so you don’t fall behind. It’s worth having an online savings account where you can put any extra money aside to help out with unexpected expenses, such as a field trip or student ball. Don’t be tempted into putting little luxuries on a credit card. “Never ever have a credit card,” warns Evenden. “It’s just too easy to run up thousands of pounds of debt.”

Student overdrafts – how they stack up

Bank / Interest-free overdraft

Barclays

Year one: up to £1,000

Year two: up to £1,250

Year three: up to £1,500

Year four: up to £1,750

Year five: up to £2,000

Lloyds TSB

Year one: up to £1,500

Year two: up to £1,500

Year three: up to £1,500

Year four: up to £2,000

Year five: up to £2,000

Natwest

Year one: £1,250

Year two: £1,400

Year three: £1,600

Year four: £1,800

Year five: £2,000

Halifax/Bank of Scotland

Year one: up to £3,000

Year two: up to £3,000

Year three: up to £3,000

Year four: up to £3,000

Year five: up to £3,000

HSBC

Year one: up to £1,000

Year two: up to £1,250

Year three: up to £1,500

Year four: up to £1,750

Year five: up to £2,000

• This table represents just a selection of banks and building societies to give you an idea of what’s available. For more information, visit individual websites.

Web aid

Uniaid student calculator

Add up your incomings and outgoings minus the hassle www.studentcalculator.org.uk

Educational Grants Advisory Service

Guidance and advice on student finance www.egas-online.org

Money Saving Expert

Sign up for a weekly e-mail of money tips www.moneysavingexpert.com/banking/student-money-saving