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Cashback incentives on student bank accounts shrink

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Banks have cut back on the upfront cash incentives they offer to students, according to research.

Cash incentives have been a big draw for students over the years and in the past, they have been around £100.

However, this year just three providers offer a cash inducement and the highest available is £80 cashback from HSBC, analysis by Defaqto, the financial information firm, found. This offer includes a £20 Uber Eats voucher or yearly next-day delivery with ASOS Premier.

Natwest and RBS are offering £50 cash up-front this year.

Providers have also cut back on the interest paid on balances. This year only two providers are offering any interest on balances with student accounts. The best of these is TSB’s Student account, which is offering 5% on balances up to £500. The other account is the Halifax Student account, although this only pays 0.1%.

Student accounts have typically offered interest free overdrafts to students, which provided a useful safety net for students living away from home for the first time.

The amount offered is sometimes staggered so that the amount increases over the term of the account. Barclays, for example, has recently reduced how much interest free overdraft is available to just £1,500.

Some banks and building societies are offering other incentives to attract student customers. Santander is offering a free four year 16-25 Railcard, which gives a third off rail travel in UK.

Barclays is offering a voucher for a free 12-month subscription to Perlego, an online e-book subscription service.

However, students are urged to consider all features of an account against the incentives.

Katie Brain, banking expert at Defaqto, said: “This year’s students have had to work hard studying through lockdown to get the exam results to get into university. Getting a bank account is unlikely to be their top priority but getting a good product with the right features and benefits for them will make their time at university much easier.

“Banks know that graduates are likely to be good customers, potentially earning higher salaries after university and this is why the student bank account incentives are so generous.

“Managing money when you leave home for the first time can be daunting and it’s important to get a bank account that suits the student.”

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