It's official: students are revolting. Come between them and the bare necessities of life and you are sure to come off worst. There are three things which are crucial to every student. I'm talking beer, bonking and bank account.
So when (Advertisement)
high street giant HSBC slapped huge charges on student overdrafts, the reaction was anything but bookish. The overdrafts - previously interest-free for students graduating this summer - were suddenly bumped up to 9.9% APR.
More than 5,000 students joined a campaign organised by the National Union of Students using networking website Facebook. The group called 'Stop the great HSBC graduate rip-off' argued that the bank should reverse its decision to stop the free graduate overdrafts and it seems their persistence and timing - just as the bank is hoping to snare new students at the start of term time - paid off. The bank has frozen plans to charge for the overdrafts and will refund any charges made, saying it was not too big to listen to its customers.
The NUS set up the protest site because it felt HSBC had reneged on the banking deal offered to students. It gave them accounts on the basis that they could have an interest-free overdraft of up to £1,500 for three years, reducing the facility by £500 a year. Then in July it informed customers that it would be charging this year's graduates for those overdrafts unless they paid a £9.95 monthly fee. The move would have cost a graduate who had the maximum overdraft of £1,500 nearly £12 a month, or more than £142 a year.
It is smart of HSBC to back down; the bad publicity over this would ultimately have cost them far more than the profit they might have made from the overdraft interest. As it is they returned forecast-beating profits of £7billion for the first six months of this year alone.
University challenge
It is easy to understand why the student bank account market is a lucrative one. Catch them early and you could have a customer for life, and certainly one for 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.
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' 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.
Best buys
Here is a look at what is on offer in the student bank account market for 2007/08
Company | Credit | Interest Free | Auth | Unauth |
Abbey The Abbey Account (Student) | 1.49% | Year 1 £1000 | Nil | £20 state perd |
Barclays Bank Student Additions | 0.10% | Year 1 up to £1000 | Nil | Nil |
Clydesdale Bank Student Account | 3.25% | None | Nil | Nil |
Co-operative Bank Student | - | Year 1 £1400 | Nil | Nil |
HSBC Student Service | 0.10% | Year 1 up to £1000 | Nil | - |
Halifax Student | 2.00% | Year 1 up to £2750 | Nil | £28 pm |
Lloyds TSB Student | 0.10% | Year 1 £1500 | Nil | £30 per day |
NatWest Student | 0.10% | Year 1 up to £1250 | Nil | Nil |
Royal Bank of Scotland Student Royalties | 2.00% | Year 1 up to £2500 | - | £10 pm |
Smile Student Account | 3.00% | Year 1 £1000 | Nil | £5 pm |
Yorkshire Bank Student Account | 3.25% | None | Nil | Nil |
Source: Moneyfacts.co.uk Information correct as at 15 August 2007
Sources : Yahoo Biz
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