Banking giant Santander has launched a £50 cash bonus for students who take out a student current account.
As students get ready to head off to university this September, many will be contemplating setting up a new current account for when that bounteous student loan arrives.
One account which is now likely to be a pretty attractive option is the Santander student current account, after the bank today announced a £50 cash incentive to students who open or switch to the Santander student current account between 16th April and 30th June 2012.
So how does this deal compare to other high street banks? And what features should students take into account when picking a current account?
Santander’s student account
Santander’s student current account offers an interest-free arranged overdraft of up to £2,000 and cash in your pocket for opening one up or switching.
You are given the flexibility of managing your account online and can receive texts or email alerts when you are nearing your overdraft limit (useful after a hazy drunken night out). The switching service offers an easy transfer of standing orders, bill payments and direct debits from your old bank account.
Incentives
Banks are notorious for trying to lure students into banking with them using offers of large overdrafts and promises of fab freebies.
Some campaigns that come to mind include HSBC’s much-ridiculed offer of ten free CDs when signing up and NatWest's popular free year's railcard. With the cost of attending university set to exceed £9,000 in fees alone, it can be easy toget caught up in incentives like the cash welcome, but keep in mind what you want from the account in the long-term.
Overdraft
Student bank accounts offer quite substantial overdraft facilities, which generally increase year on year and may be the first introduction to borrowing for many young people.
The draw is that borrowing is interest free and serves as an extra boost to the limited student loan. Banks will often advertise their overdrafts using the limit which is only actually available after three years as means to entice you in. So make sure you investigate exactly how much you can go into the red in year one!
And always remember that this is not just free money to spend as you like. The money is just a loan that will have to be paid back.
The catches
Overdrafts are a good short-term borrowing facility, but beware of the catches and pitfalls of readily accepting this offer from banks.
Sometimes arrangement fees and charges for exceeding an agreed limit are unexpectedly slapped on. Also, many students graduate with a balance in the red, maxing out their overdraft by the end of their studies. It is worth researching when you will have to pay the outstanding amount back, when your bank will start charging interest and what the charges are for arranging or going over your agreed overdraft.
Best for you
Of course choosing the right account depends on your financial situation and what you think you can afford. If a large overdraft is attractive the Halifax and HSBC student accounts offer a limit of up to £3,000 in your third year. Take a look at our comparison table for an insight into what some high street banks are offering.