Starting out life as a university student is just as daunting as starting your working career. For some it is even more difficult because it involves moving away from home to a distant city and you literally have no support network. Living on toast and pot noodles is no way to learn and that’s why having the most flexible or appropriate student account is critical to your success. The student stereotype of living a poor existence, with money for nothing apart from discounted beer at the student union, is not how most students need to live in the UK today.
Finding the Best Zero Percent Overdraft
The first thing you should do is find the bank that will give you the best 0% overdraft. Don’t think of this as money in your pocket, use your student finance to live on for as long as possible and try to keep your overdraft as a contingency for dipping into in the last month before your next student finance instalment. Be aware of banks that advertise their overdrafts as “up to” rather than a guaranteed set amount.
If you open a student account, the overdraft will not be activated by most banks until your student finance money is paid in. It is only then you find out you do not qualify for the full amount advertised. You will be able to change your bank account to another when your next instalment is due, but do you really want that hassle? In addition, if you have eaten into your overdraft, things might not be quite so easy next time around; because banks will assess you as more of a risk because of your added debts.
Stay within your Limit at All Times
This is the golden rule of all banks. Borrow as much as you want, but never stray over your limit because it produces a very negative image of you and the way you organise your money. Even if you have bills due to come out of your account, make sure you cancel direct debits and deal with the companies you owe money to rather than paying unauthorised overdraft fees on top.
Banks frown on people who don’t stay within the limits of their overdraft. It may even be worth speaking to your bank to ask them to increase your overdraft if you know you will receive money in a few days. Banks are often more accommodating than you think if you talk to them.
Switch your Account after Graduating
If you have graduated, your bank will often give you a year or so grace where you still receive 0% interest on your balance, but it is much wiser to switch to a graduate account if your bank is going to charge you interest any time sooner. Some graduate accounts will accept people who have graduated more than a year ago and that allows you to switch long after your preferential student terms have expired. If you need extra cash, look for a graduate account that will extend your overdraft limit, but you should really be thinking about paying your debts down as soon as possible.
Don’t Forget the Credit Scoring
It’s important to do your research beforehand because banks will do a credit check every time you ask for an account at a bank and they see what they can offer you. A high number of credit checks on your account will throw up alarm bells and actually reduce the amount of credit available to you. You should have no problem with just one or two searches because that is normal, but don’t traipse from bank to bank asking for better deals, get all the information you can and make just one or two banks your target.
If you want to take it that extra step further before tarnishing your credit profile with these searches, why not exhaust your avenues of information, narrowing down the amount of banks and accounts to the ones more likely to give you a yes? There are plenty of discussion boards and consumer advice sites out there that supply this information so you can make a more informed decision.
Abel Froman is a blogging former student. Although money advice wasn’t forthcoming during his studies, he often found that money was (and still is) one of the most important issues to young adults going into higher education.