Thursday, 2 December 2010

Student banking – advice to control your finances

As a student, a great way to control your finances is to get as much advice and support as possible. Of course, that means talking money and bank accounts, but it also means looking at your lifestyle, too.
There are so many different bank accounts and financial products available, it can be difficult to know the best one to pick when you're a student. Here are some things you should look out for:

Student accounts:
 These bank accounts are specifically designed for students, so often include an interest-free overdraft. They also commonly include gifts or discounts for things that students use a lot or just like. But it's important to also look beyond the freebies.

Credit cards:
 These can be a convenient way to manage your money when used appropriately. There's usually an interest free period, so if you can pay them off every month, that's great. They can also help spread the cost of expensive items.

 If you take out more money from your current account than you actually have in it, you will become overdrawn. If this happens and you do not have an overdraft facility on your account, you may be charged a fee. This is usually referred to as an unauthorised overdraft.

However, if your account has an overdraft facility on it, then you can agree an overdraft limit in advance with your bank. This authorised limit or agreed overdraft is the maximum amount you can take out, over and above what's already in your account.

As with an unauthorised overdraft, if you exceed your authorised limit, you may be charged a fee. Likewise, while your account is overdrawn, you'll usually be charged a set amount of interest on the amount you have borrowed until you pay it back. However, an agreed overdraft may give you some financial flexibility, so it's useful to have. Just make sure you stay within your agreed limit. Plus, with the mobile banking services offered by most banks today, you can set yourself upper and lower limits on your current account. When you reach these, you’ll be notified with a text alert, which could help you stay within your agreed overdraft limit.

Check your balance regularly:
 These days, banks offer you a wide variety of ways to check your balance, which can really help you stay on top of your finances. It’s worth checking if your bank offers ways for you to manage your money such as online, by phone or even via your mobile. Plus, you can check your balance at a Cashpoint ® machine, at the local branch of your bank or even the Post Office ®.
Good debt and bad debt
With the advent of government-sponsored debt in the form of student loans, it is now common for most students to have some debt. But the real danger of this is that students might begin to view all debts as the same, when in fact they aren't. That's why it's important to understand what's meant by the terms 'good debt' and 'bad debt'.

A good debt might include something like a student loan because the interest is so low, e.g. 1.5% p.a. Obviously, no one wants to be in debt, but with loans such as these, remember that you are investing in your future.

Bad debt is the kind you get with high interest loans or store cards where the interest could be anywhere from around 5% up to 30% a year. Don’t forget, if you have a credit card and you pay your balance off before the required date, you won’t be charged interest. Most credit cards offer up to 56 days interest-free, so check with your provider to find out how many days you'll receive.
Student loans
Student loans are among the cheapest form of long-term borrowing available. There are two different types of student loan. One covers tuition fees; the other is for help towards day-to-day living costs such as rent and travel. All eligible students can get the full Student Loan for Tuition Fees, and at least a partial Student Loan for Maintenance, regardless of their household income.

However, this changes depending on where you live, so it’s worth looking at the 'Related links' section on the right side of this page to find out how you’ll be affected. For example, if you’re fortunate enough to be Scottish and studying in Scotland, you don’t need to worry about tuition fees as you don’t pay them. And, if you're from England or Wales but studying in Scotland, your fees will be cheaper.

Remember that you won't have to start repaying student loans until you've left university and are earning more than £15,000 before deductions.
Graduate accounts
These are designed to ease you into your working life by still giving you student conditions, such as an interest-free overdraft, but phasing it out slowly as you begin to earn.

When trying to choose a graduate account, an important factor to consider is the length of time you'll be able to use the interest-free overdraft. This outweighs the introductory bonuses. And, make sure you think carefully before opting for a fee-paying graduate account that claims to give you ‘better’ interest-free overdraft deals. It may work out more expensive to pay a monthly fee, usually around £5-£10, than the no-fee accounts with the best 0% overdraft conditions. The exception is if you think you’ll use the additional benefits and that they are worth the extra cost.

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