August 2006 Dog bites man is a similar phrase to student with overdraft, ie both are never going to make the front page of the news. So with all/most students running overdrafts that is the single most important factor in determining which bank account to open and not the gimmicks or bribes a bank offers such as a free iPod etc.

Student Overdraft Rates - 2 Important Points

Most student bank accounts offer some sort of free overdraft rate and here are the two most important points to look out for –

1 - Initial overdraft level

• Many banks offered a tiered overdraft level increasing in year 2 over year 1 etc
• For example, a £1,500 overdraft in year 1, £1,750 in year 2 and £2,000 in year 3

2 - The interest rate charged after the agreed level has been breached

This is where the banks try and make their money because they know full well that students have tendency to go beyond the agreed level

In our view the level of interest charged after the initial agreed level is as important as the initial interest free amount, if not more so

And don’t necessarily believe the banks when they say that they might offer you a cheaper interest rate of say 7% if you do go over the agreed level - most won’t unless for a very good reason