How to find the best student current account (and catches to watch out for)

One of the most important bits of business to take care of before setting sail for university is opening a student current account.

A good piece of advice for savvy students and parents is to remember that a top-notch interest-free overdraft is far more valuable in the long-run than any special offers.

Interest-free overdrafts are the bread and butter of student banking – this is what distinguishes a student account from a bog-standard High Street deal.  

Kevin Mountford, banking expert at Moneysupermarket.com, says it's a 'battle ground' for banks and students should take full advantage. 

'It can be very tempting at freshers week with lots of banks promoting their wares left, right, and centre,' he says. 'By all means look at the gimmicks but remember: they're not nearly as important as the overdraft facility.'

At this stage, it's worth noting that students are only allowed one 'student' current account across all banks. A key – and sensible – reason for this is that it prevents them racking up huge, unmanageable debts on several interest-free overdrafts. When applying, students will also need a UCAS offer or other proof that they're about to start life at university this autumn. 

Interest-free overdrafts

An interest-free overdraft should be used as a cushion. Ordinarily it costs us a bomb to go overdrawn, due to high interest rates.  Typically, a bank might put a limit on how much you can go into the red – say £300 – and even then might charge £1 a day or more for the privilege.

Specialist student accounts, though, come with a free overdraft as standard. The limit in the first year of study is typically around £1,000, but it depends on the bank. Some start at £200 and ask students to request increases if they need more. At most banks the limit rises in a student's second and third year of study, typically reaching around £3,000 in year three. 

An interest-free overdraft can be very  cheap borrowing and almost every student dips in during their degree.

Use a comparison site like Moneysupermarket.com, Moneyfacts.co.uk, Uswitch.com, etc., to sniff out the top deals. Getting an extra £500 in the final year of a degree can be a life-saver for hard-up students. 

A good tip is to use several comparison sites simultaneously. They don't like to sing about it, but sites don't  include every bank in their lists; others advertise exclusive offers you won't find elsewhere. The only answer is to be thorough and use two or three big names and check banks' own sites for account information.

Read more: http://www.dailymail.co.uk/money/studentfinance/article-2022922/How-best-student-current-account-catches-watch-for.html#ixzz1r5dE0ajQ