A recent survey by Lloyds TSB found that one in three students could not afford to go to university without the option of staying with their parents.
A further 26% report that they are worried about managing their money during their studies, while a massive two thirds (65%) say it will be difficult to afford university if the cost of living continues to rise.
OK, so the fact that students are strapped for cash is not exactly groundbreaking news, but it’s clear the problem is only getting worse. So if you’re heading off to university this year, it’s absolutely vital that you keep a tight rein on your finances.
Of course this will be difficult to do if you’re haemorrhaging money to your bank, so the first thing you need to do is find a current account that benefits you. That doesn’t mean choosing the one that offers the most freebies; what you’re after is competitive rates.
Horses for courses
So which is the best current account on the market? Unfortunately, no single deal offers the best of everything, so the account most suited to you will depend greatly on your own financial situation.
For example, if you are likely to dip into the red, you can minimise the cost of repaying that debt by choosing the card with the best interest-free overdaft, while those who expect to have a few quid left over every month should opt for a high credit interest deal.
The table below highlights the key facts for six of the most popular student current accounts on the market today.
| Interest Free Overdraft (Year One) | Interest Free Overdraft (Year 5) | Credit Interest |
| Halifax | £3,000 | £3,000 | 2.02% |
| Abbey | £1,000 | £2,000 | 4% (on first £500) |
| Smile | £1,000 | £2,000 | 2.27% |
| HSBC | £1,000 | £2,000 | 6% (on first £1,000) |
| RBS | £1,250 | £2,000 | 2.02% |
| Barclays | £1,000 | £2,000 | 0% |
Best for overdrafts
The reality of student life is that you’re more likely to dip into the red than remain in the black, so we’ll look at the overdrafts on these accounts first.
Halifax is the clear winner here, offering up to £3,000 from the first year – that’s three times more than its competitors. As generous as this may be, this should not be seen as an invitation to spend more. Only choose this card if you think you’ll really need that much of a credit line. If you are one of those people who are likely to spend money on tat simply because it’s there and it’s “free” (it’s not, of course), you may be better off choosing an account with a lower overdraft.
It’s also worth noting that not everyone will qualify for the card as Halifax credit scores applicants, and if you don’t make the grade, you don’t get the account.
Best for credit interest
For those fortunate enough to have money left over every month, it’s essential you make the most of it by choosing a card that pays a high rate of interest.
HSBC is probably the best for this, paying an impressive 6%, though unfortunately it is limited to the first £1,000 in the account (all funds over this earn interest at a dramatically reduced rate).
Abbey also deserves a mention with its 4% APR, and the fact the bank is offering a £50 cash offer when you apply doesn’t hurt.
Read the fine print
As a final point, it is absolutely vital you read the terms and conditions of any deal before applying, as there may be a host of hidden costs and charges that could come back to haunt you.
