Beware of student current accounts that don't make the grade

As thousands of A-level students get their results and start thinking about leaving home and heading off to university Tiscali's partner price comparison website moneysupermarket.com, urges them to take time to shop around to find the best banking package during their student years and judge with their heads rather than be swayed by introductory gimmicks or gifts.

Banks and online financial services companies are once again aggressively competing to get students to sign-up with them before they head off to university, many enticing them with gimmicks and special offers. But what students need to do is look for the best interest rates and overdraft facilities that will suit their needs during their studies.

Peter Gerrard, senior researcher at Tiscali's partner price comparison website, moneysupermarket.com says: "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.

"Many high street banks use free gifts and offers to attract students - the annual cinema pass from Royal Bank of Scotland and the free rail card from Natwest are examples - but the first priority for every student should be to find an account that offers an interest-free overdraft and charges no fees. After this, consider access to money from local branches and cash machines. Freebies should be the last consideration, not the first!"

However, although banks will court students when it comes to current accounts, it is a different matter with credit cards as these young consumers will find that many of the competitive deals in the market are not on offer to them.

Many providers are unwilling to take the risk of lending without a track record thus young people will have a limited choice. However, if they do obtain a card, the credit limit will be low, albeit this is good as it limits the students' exposure to debt, which is appropriate given the interest rate will often be in excess of a hefty 17%.

Gerrard concluded: "If students do want to use credit, then, other than student loans, this will often revolve around an overdraft, a credit card offered by the current account provider or expensive store cards. Where possible, I would suggest students utilise cheaper forms of credit, such as student loans or an interest-free overdraft, before considering a credit card."

The table below, provided by moneysupermarket.com, outlines the key features of the current accounts and credit cards offered by the main high street banks.

*Offers only available until 8th October 2005