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Money: New students count the cost; Jane Hall asked Beth Timney, who is starting a degree next month, to cast her eyes over the latest student accounts on offer from the big banks.

Byline: Jane Hall

THE A-level results are in and the latest crop of school leavers now know where they will be spending the next three -- or more -- years of their lives studying.

For Beth Timney, head girl at her school this year, September will see her starting an archaeology degree at Nottingham University. The move south will be a daunting experience for the 18-year-old as her whole academic life to date has been spent at the school where both her parents, Sarah and John, are also teachers.

But excitement at striking out on her own and taking the first steps towards a career she has dreamed of pursuing since she was a child, outweigh any nerves she may have about living away from home for the first time.

Beth chose Nottingham because it is the only one in the country to include underwater archaeology. ``I can't wait to start the course, '' she says with obvious enthusiasm.

But before she can pack up her trowel and other belongings, Beth faces perhaps her toughest test to date -- which student bank account to opt for. The high street banks have unveiled this year's packages to tempt students -- and the gloves are well and truly off as the battle heats up for their custom.

Incentives range from free Young Person's Railcards to cash back and money-off vouchers for everything from books and meals to bicycles.

But with student debt growing each year -- Beth expects to graduate with at least pounds 12, 000 worth -- it should be the size of the interest-free overdraft and the costs for unauthorised borrowing that occupy her mind.

As Samantha Owens, Moneyfacts research editor, comments: ``A free gift may be an attractive offer but, with such a range of accounts available, it is important to look at things such as credit interest and overdraft terms.

``Some accounts are paying interest of over 3%, while others do not pay any. With overdrafts, some accounts offer interest-free to certain limits, usually increasing over the years, but some accounts do not offer this facility at all.

``It is also important to look at the authorised and unauthorised overdraft rates as these range from 0% to over 30%. ''

Stuart Glendinning, director of moneysupermarket. com, the price comparison website, adds: ``Many students will find themselves hard-pressed financially whilst at university, with the potential to leave heavily indebted.

``Therefore, it is essential that they are sensible when planning their finances pre-university, in particular with their choice of current account.

``After this, consider access to money from local branches and cash machines. Freebies should be the last consideration -- not the first. ''

But what will Beth make of the deals being dangled enticingly before students? We took her on a tour of the major banks to see what they are offering this year's undergraduates.

Beth had already determined some of the areas she would like her bank account to meet. For her first year, she will be living in halls of residence. First years aren't allowed to have their cars with them, so she will be taking her bicycle to get around.

``Because I will have to walk or cycle everywhere, I need to know that I will be able to get hold of money quickly, so a bank that is near the campus or has a cash point is important. Also, because I will have to travel a lot with my course, an account that offers discounted travel insurance would be good.

``Next year I will have to move off campus and I am worried about money for the future. I have some savings and I will be taking out the maximum pounds 3, 000 Student Loan every year.

``One of the plus points of doing archaeology is that, if I go on digs, I will be paid, so I should have some money coming in during the summer holidays, but I am look-ing for a bank account that offers me a good interest free overdraft. ''

Beth admits she hadn't considered the cost of accidentally going into the red -- a possibility for even the most money conscious student.

First stop on Beth's tour was Barclays. All she was offered was a leaflet and was instead re-directed to another Barclays' branch for advice.

Nearby Nat West was more helpful. The woman on the information desk was enthusiastic in selling the merits of her employer's student account -- including the fact it is the only one offering a Young Persons Rail Card and the bank with the most on-campus facilities -- but was less up-to-date on some of her information.

When quizzed by Beth on how much she might be charged for an agreed overdraft above the interest free limit, she was told 16. 9%, and 29% -- which would make the account one of the worst offered on the high street. In fact, with the student account you pay 0% for agreed overdrafts above the interest free limit and 17. 81% otherwise. There was no free travel insurance.

Over to Lloyds TSB where Beth already has a current account.

The adviser gave her helpful and sound information, and even encouraged her to shop around. But Beth was less than impressed with the news that Lloyds would charge her pounds 20 each day her unauthorised overdraft increased by pounds 10 or more, capped at pounds 80 per month.

She was also left scratching her head at some of Lloyds's free gifts -- 2 for 1 fish and chips and curry offers as well as 16% off a bike.

A few doors up, HSBC also bent over backwards to help Beth. But here too some of the advice was off-pitch.

Beth Timney toured the banks for the best offers The adviser failed to mention HSBC's trump card -- that every account holder will be able to take out as much as they want, up to the annual limit, from day one.

Barclays, for instance, has the same annual limits as HSBC, but new account holders cannot withdraw more than pounds 200 without permission.

New starters might need money quicker than they think this year, as the Student Loans Company has warned loan cheques might not be ready at the start of the term for applicants after July 2.

HSBC also told Beth that both authorised and unauthorised borrowing would incur the same rate of 14. 8%. But HSBC actually charges nothing for accidentally slipping over the interest-free limit and one per cent over base rate -- so 5. 75% at present -- for authorised borrowing.

Abbey and the Co-operative Bank were quickly dismissed by Beth. ``Neither seemed very keen to sign me up and in the Co-op's case the fact it has no graduate account and only offers a 0% overdraft for a year after you leave university is a big minus.

``I could spend four or five months looking for a job after I graduate, so I would need to know I had access to an interest-free overdraft for a lot longer.

The final port of call was the Royal Bank of Scotland. ``It charges quite a high rate of interest on its Student Royalties account, both on the authorised and unauthorised overdrafts, but the interest-free overdraft limits are quite high and that extends to three years after you leave university.

``Some of the freebies are good too. I especially like the 20% off books which runs for the entire time and the 20% discount off single trip travel insurance.

After also discarding Barclays, Beth is now mulling over which is the best deal between HSBC, RBS, Lloyds and Nat West. ``It's been really useful going around all the banks, '' Beth says. ``pounds 1, 000 is a lot of money, but it's easy to spend and even harder to pay back. ''


Ethical considerations mattered for Hannah Kenny, who is about to embark on a degree in medicine
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Title Annotation:Business
Publication:Daily Post (Liverpool, England)
Date:Aug 30, 2004
Previous Article:Money: QUESTIONS of CASH.
Next Article:Money: Co-operative Bank account the last -- ethical -- piece in Hannah's jigsaw.

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