Graduate to better banking
Freebie gadgets are a useful differentiator for students choosing between current accounts, but there are other factors to consider. Pauline McCallion looks at how to find the perfect student account.
Shopping around for financial products is becoming second nature to most UK consumers, thanks to a competitive banking market with a wide range of products and rates. However, students should be more careful than most when choosing a current account, according to Moneysupermarket.com.
Stuart Glendinning, managing director of the price comparison site, points out that as students tend to be young tenants, rather than homeowners, they won’t have had a chance to build up a good credit profile by the time they graduate. Add to this the fact that recent graduates have obviously only been employed for a short time and the suggestion is that many will have to settle for the deals offered by the bank they chose as an undergraduate.
Therefore, simply going for the institution that offered a free iPod, some CD vouchers or discounted driving lessons may prove to be a poorly thought-through move after graduation. Glendinning explains: “When it comes to the banks beating a path to your door, students should know why they are so valued. The banks are keen to secure students’ business because the start of university is one of the key stages at which people might open a new current account and they are viewed as a lucrative long-term customer.”
He therefore suggests that students should keep several other points in mind, such as the level of fee- and interest-free overdraft available, any other charges, and access to cash and other banking services. However, freebie gadgets could perhaps be used to decide between similar packages.
“Students should make the most of being courted by the banks but recognise that, though little profit may be made out of them while they are studying, payback will commence after they graduate,” Glendinning says.
Although banks are taking a long-term view at this point, keeping in mind graduates’ limited ability to shop around, they do make some concessions for such customers. Therefore, undergraduates should also look for accounts that offer an interest-free overdraft after graduation.
Glendinning concludes: “During their studies, the bank will have been paying the student to be a customer, whereas once they graduate, it will be looking to recoup some of the money invested.” Prospective students should keep this in mind as a three-year old iPod or a cut-price driving lesson taken long ago probably won’t be any consolation once higher overdraft interest and stricter fees kick in come graduation.