Finding the Best Student Bank Accounts

High street banks are increasingly targetting the student bank account market, and it's not hard to see why. Catch a customer early and you could have them for life, or at the very least a few years while they pay off loans and debt. With thousands of students heading off to university this autumn, it is crucial that they start thinking about finding a student bank account that offers the best value and not be lured in by freebies.

It would be great for a young individual to learn student money management at an early age.

Each year banks try and entice new students to open accounts by offering goodies, like free cinema tickets and discounted CDs. However, students who will need an overdraft to help pay for their time at university should look at the interest-free limits offered by accounts and not these 'free' offers and gimmicks.

"Halifax's account offers the best interest-free overdraft limit of up to £2,750 each year," says Mike Naylor, personal finance expert at uSwitch.com ."RBS offers an interest-free overdraft facility of up to £2,500 per year," he continues. "Students lucky enough to have money in their account during their student years should choose an account with a good credit interest rate. For example, Smile offers students a credit interest rate of 3%, followed by Halifax's 2%. At the other end of the scale Lloyds TSB pays its students just 0.10%"

"Lloyds TSB has the most attractive 'free' gifts worth up to £299. This includes up to £150 of cash if money is paid in three times and the account stays in credit for a year, as well as a free NUS card, and mobile phone insurance. However, the price of this 'generosity' is a paltry 0.1% on money in the account. NatWest offers students a practical 'freebie' in the shape of a 5 year railcard worth £100, but also pays just 0.1% credit interest," says Naylor.

Muslim students don't need to worry about interest at all - and now they have the chance to open a special Islamic Student Account which has just been launched by Lloyds TSB. The 'Islamic Student Account' is the first of its kind in the UK and means that Muslims studying here will now be able to manage their money without compromising their faith. According to Islamic law (Shariah), customers cannot pay or receive interest (Riba) on their money and deposits held in accounts cannot be invested in certain industries, such as gambling or alcohol. However, students who open the account will receive all the benefits of the bank's standard student account, including an interest free overdraft of £1,500 for three years, rising to £2,000 for those on longer courses. They will also receive a free iPod Shuffle and one year's free Youth Hostel Association (YHA) membership.