Tips and tricks The ultimate student finance guide

Tips and tricks The ultimate student finance guide by Kate Saines, from source myfinance.co.uk. The ink might only just be dry on your exam papers, but it's never too early to start thinking about student finances and comparing student bank accounts.

In fact, one of the golden rules when it comes to student finance is to get cracking as soon as possible before you embark on university life. That's according to Confused.com's Alex Higgs whose do's and don'ts of student finance include strong advice to open a student account well in advance. It makes sense. After all, if you can get the financial side of things sorted before your course starts there's one less thing to worry about at a time when you will be bogged down with distractions. We've gathered the some top tips to help you find a decent bank account to serve you through your student years.

Tips 1 – Open a student account early As mentioned, banking expert Alex Higgs reckons the earlier you set up a student bank account the better. This is because new students will need an account for their loan to be paid into, and from which university tuition fees, rent and other expenses will come. Mr Higgs said: "Not having one set up could result in delays in receiving much-needed funds. Using a non agreed overdraft to pay bills whilst an account is being set up could lead to some hefty charges." With the average student picking up £23,000 in debt during their studies, the last thing you need is to be in the red before you even begin your course.

Tips 2 – Do lots of research It's highly likely you already have a bank account of some description, especially if you have worked part-time whilst at college or if you are a mature student returning to study. However, with many banks and building societies providing accounts specifically for students it may well pay to switch to one of these. But whether you already have an account or are new to banking entirely, the best advice is to shop around and scour every corner of the market to ensure you find a bank account which suits you. You'll find student accounts tend to offer better rates on overdrafts than mainstream accounts, typically charging zero per cent interest on the first £2,000. Many will also offer freebies in order to tempt you in. But if you don't do your research and investigate the different deals on offer, you'll never know if you are missing out on a better account. Price comparison websites are a great place to find out more about the student accounts on offer this year. Make sure you visit several, however, as this will give you a broader outlook.

Tips 3 – Don't be fooled by the Freebies Those freebies on offer, which we just mentioned, are pretty much always genuine. But you should not base your decision to open a student account purely on which bank is offering the best free gift. These gimmicks, or 'benefits' as the banks call them, come in all sorts of shapes and sizes. They range from the practical –mobile phone insurance and deals on AA membership – to the more appealing discounts on laptops and free music downloads. It's important to remember, however, that these are designed purely to lure you in and they are unlikely to be 'free' in the classic sense. The most important feature of a student bank account is the interest-free overdraft. Alex Higgs said: "Anything that comes free with the account as an incentive is being funded from somewhere, whether it's through higher fees and charges, lower in-credit rates or post graduation support." What's more, you probably already have most of these alluring gifts but just don't realise it. Take laptop insurance, something Santander was offering with its student account in 2010. While it might sound like a very good idea, if you have a decent contents insurance policy, your laptop will already be covered. Meanwhile free worldwide travel insurance is pointless if you cannot afford a holiday in the first place, so make sure you will actually use any freebies offered. Read more: Managing your finances as a mature student

Tips 4 – Find the account with the best overdraft facility Most experts on student finance agree the interest-free overdraft is the most important element you should base your decision on when choosing an account. Mr Higgs suggests after thinking whether the bank has a branch near your campus, the overdraft rate and the fees and charges imposed if you go over your limit should be next on your priority list. Claire Francis, site editor of Moneysupermarket.com, backed this up. She said: "When considering what bank accounts to opt for, students should look at the level of interest-free overdraft available, unauthorised overdraft rates and lastly the freebies, as although useful, the value of these will be low compared to interest-free overdrafts." In 2010, most of the top student bank accounts were offering interest-free overdraft limits of up to £2,000. But you could get higher interest-free rates – Halifax's Student Current Account's was £3,000. There is, of course, a danger you will exceed your overdraft limit, which is why it's essential you also look for an account which does not penalise you too heavily if this happens. Check out the interest rate being charged for unauthorised overdrafts. It's not unusual to find rates as high as 28 per cent. Many banks and building societies also offer quite attractive interest rates to students who remain in credit. Last year many were paying a two per cent 'in-credit' rate which is better than many savings accounts at the moment.

Tips 5 – Beware of credit cards The general consensus on students and credit cards is they don't mix. However, while some experts think they should be avoided at all costs at the risk of landing a big black mark on your credit record, others believe they can come in handy for emergencies. Alex Higgs said having a single credit card which you use occasionally and pay off punctually could be helpful. "Having a credit card and demonstrating that you can manage credit can help to positively affect your credit rating, which might make it easier, and ultimately cheaper, to be accepted for credit cards and mortgages in those post graduation years." He suggests setting up a direct debit for the minimum payment to ensure you do not get charged or penalised for missing a payment. If you suspect you might not be able to pay back the balance straight away, and fear you may use a credit card a little frivolously it might be best avoided. Besides, Kevin Bray of independent financial research group, Defaqto, said there were only a few credit cards available to students and these tended to be offered only to customers who already had an existing relationship with that bank. "There is very little difference between cards in terms of rates and fees," he said, "but the credit limit can vary. The maximum is usually £500."

Tips 6 – Consider pre-paid cards Pre-paid cards, which can be loaded with cash in advance, provide an excellent way to manage your student finances and a good alternative to credit cards. They are especially useful if you receive an allowance from your parents as they can be topped-up by your mum or dad, used for day-to-day expenditure such as food shopping and there is no risk you'll go overdrawn. Confused.com's Alex Higgs said: "It also provides a safe and secure means for the parents or grandparents to give students a little something without it being in the easily lost or stolen traditional wodge of cash." He suggests concerned parents, worried their son or daughter might find budget management a little tricky in their first year away from home, could use the card as a training aid before their child heads of to university. "You could ask them to manage the family food shopping for a month and give them the budget for this," he said.

Tips 7 – Opt for Mobile Banking if Possible Accounts offering mobile banking can come in very handy as they provide a text alert system to notify customers when they are about to exceed their overdraft limit. This could help you avoid facing charges or penalties. What's more some of the banks offering this service send text to alert customers when direct debits and standing orders are due. Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.