Student finance: the uSwitch Guide

Money is often tight as a student which is why it's so important to make sure you get the best deal on everything concerning your finances, especially your student account. In fact, a study by uSwitch found that in one year alone, choosing the wrong student account could end up costing you as much as £75*.

Use this guide to find essential information about student finance and choosing a student account.

There are all kinds of different financial products available to students, including:

• Student bank accounts
  Being a student can be expensive, and many banks recognise this and offer special student accounts. This biggest benefit of a student account is that many come with overdrafts that are interest free, up to an agreed limit, which usually increases for each year of your degree. After you graduate, you will start paying interest on some or all of whatever you've borrowed. Banks don't offer interest free overdrafts out of the goodness of their hearts though - many students go on to be high earners, and are therefore the kind of customer that banks want to keep hold of. Student bank accounts also almost always come with debit cards, that can be used at cashpoints and for shopping.
• Credit cards
  Some providers offer student credit cards, and while a credit card may be useful for emergencies or for short-term borrowing, it's not a good idea to rely on them. If you can't pay off your balance in full each month, interest charges can build up quickly, leaving another debt to be repaid. If you do decide to get a student credit card, read our article on student credit cards before you pick one.
• Insurance
  It's very important to make sure all your possessions, such as clothes, CDs and computers, are insured while you're at university - whether you're living in halls or in rented accommodation. Shop around to make sure you find the best insurance deal for you.
• Student Loans
  Student Loans, available from the Student Loans Company, allow you to borrow money at a low interest rate that you only have to pay back once you are earning over £15,000 a year, when it will be taken straight out of your pay packet.

Student accounts are only available to full-time students who are over the age of 18. To get a student account, you must be studying for a degree or equivalent qualification at university, college of further education, teacher training, nursing or agricultural college.

Student accounts are not available if you are still at school or studying for your A levels. You can only legally take on your own credit commitments when you are over 18.

All the major banks offer student accounts, but it's a good idea to compare the different deals available to find the right one for you. Here are a few important things to ask yourself before you choose an account:

• How are you going to use your account? If you think you're going to be lucky enough to be in credit while you're studying, opt for an account like those from Abbey or HSBC as they will offer up to 2% AER on your balance. If you're going to be relying on your overdraft, make sure you get an interest-free account, like the one from Lloyds TSB, which gives you an interest-free overdraft of up to £1500.
• What gifts or incentives are available? Many banks offer gifts like CDs, cinema vouchers and even cash when you open a student account. Weigh these up carefully. While a £50 reward might sound great, a railcard might actually be more useful and save you more money in the long term.
• Is there a bank branch on or near campus?
• Is there a dedicated student advice team? You may never need this, but could come in handy if you ever have any questions or run into any problems.
• Does the student account have online or telephone banking services?
• What additional services are available with the student account? For example, what sort of debit card will you get and where can you use it, and is there a student credit card available?
• What happens to your student account when you graduate? It's important to think about what will happen when you finish university, for example, how soon will you have to start paying off your overdraft, what rate of interest will you pay and do they offer graduates any other perks or services?

Student Loans are there to help you get through further education without charging you an exorbitant amount of interest. Student Loans are available to UK students. Usually you need to be under 60 and on a full-time course to be eligible for a loan. To find out if you're eligible for a student loan, see the DirectGov website.

Taking out a loan is always a big commitment, but Student Loans are great option for many students because:

• Interest rates are low and rise with inflation, which means that the amount you repay will have the same value as the amount you borrowed.
• You only start repaying the loan once you have left university and your income reaches over £15,000 a year, then you'll pay back nine per cent of whatever you earn over £15,000 and it will be taken straight out of your pay packet.

For the majority of students, your Student Loan will be a tuition fee loan, plus a maintenance loan, which will be paid directly into your account at the start of each term. The amount you can borrow depends on where you live and study, your course, study year and parental contribution. The Directgov website has a student finance calculator which could give you an idea of how much you'll get from Student Loans, grants and bursaries.

Full-time students can apply for loans, grants and bursaries using the online Student Finance Application Service.

Part-time students can apply for grants by downloading an application form which they then take to their college or university. To download the form, go to the DirectGov website.

It's a good idea to apply as early on as possible - however you can apply for your Student Loan up to nine months from the first day of the academic year if you need to. It's important to remember that you'll need to make a new application every year you are at university.

Looking for a better bank account? Compare current accounts with uSwitch now

* Figure based on Best student account for overdrafts (Lloyds TSB student account - overdraft 0% interest for year 1 up to £1500) compared to the most expensive student account for overdrafts (Yorkshire or Clydesdale banks - 7.49% interest charged up to £1000 in year 1). If a student borrowed £1000 in year 1 from Yorkshire or Clydesdale banks then they would pay £74.90 in charges for the year. If they chose Lloyds there would be no charge. Data correct as of 28th July 2009.