Scam warning as students open first bank accounts

New students entering college for the first time are urged to make sure they have a good student bank account — and beware of another wave of scams.

Major banks offer perks, from large overdrafts to free cash, to entice newbies to open student accounts.

But choosing the right one can make a significant difference to a student’s finances during their college days. For most students, a generous, multi-year, interest-free overdraft is the most useful benefit.

This will allow them to avoid high overdraft fees if they run out of cash by the end of the term.

One of the most generous is Santander’s 123 Student current account, which includes an overdraft facility where you don’t pay interest for the first year unless you dive into the red above £1,500. The limit increases over the years to £2,000 for a five-year course. But break the limit and you pay 39.94 percent interest per year.

The account also comes with a free four-year 16-25 Railcard worth £120.

HSBC’s offer includes £100 cashback. It offers a free overdraft of £1,000 for the first year, rising to a generous £3,000 in the third year.

If you go over the limit by £25, you can expect a hefty 39.9 per cent interest per annum.

Nationwide Building Society is also one of the most generous, and could be a good option for those who prefer to support a mutual fund owned by its members.

It offers a £100 cashback incentive to open its FlexStudent account with a minimum deposit of £500.

There is no overdraft fee up to £1,000 for the first year, increasing to £3,000 in year three. Above these limits, it charges 39.9 percent per year. Students are warned not to be wary of online scams and fraud, which are likely to increase in the coming weeks as they begin their courses.

“Scammers are well aware that the three payment terms for student loans in September, January and April are an excellent time for them to mislead students,” said Bernice McNaught, director of the Student Loans Company.