What else do I need to consider?
Your overdraft is likely to be part and parcel of your student bank account and banks will try and tempt you with all sorts of freebies in an attempt to beat the competition and attract new customers. Some areas you might want to think about:
Your budget – think about what your expenses are likely to be, ring-fence money for the necessities like rent, food, bills, textbooks and if you have a car – road tax, insurance and MOT. Bear in mind any other ‘could be necessary’ outgoings – such as car repairs. Once you’ve totted everything up, think about what overdraft you might need – it’s good to have the safety net of a big overdraft but it’s far better to have a modest one of £500 rather than £1,000 if it’s just going to be too enticing.
Incentives and offers – banks like to give you stuff in the hope that you’ll like them enough to bank with them. If you’re torn between two who are offering the same overdraft feature see what else they’re offering – such as a railcard or vouchers, one might be more useful than the other.
Changing needs – your needs in your third year might be very different to when you started uni – you may not be living in halls and rent may be higher, you might have a work placement that’ll require you to travel. It’s worth pre-empting what your needs might be and see if your bank will accommodate those changing needs. Some will increase your overdraft depending on the year you’re in giving you some financial flexibility.
Cancellation – you should be aware that your bank has the right to cancel your overdraft at any time, and this will be the norm for most banks so don’t go on a mad spending spree unless you can pay it back.
Your credit rating – think of your overdraft and your student banking habits as a test to see how well you can handle your own finances without mum and dad breathing down your neck. Do it well and your reward will be the foundations of a good credit history that you’ll hopefully build on when you graduate and beyond. Fail, and the only thing you’ll be left with is a poor credit record which could shut the doors to future borrowing.
Luckily, we’re realists and we appreciate that being away from home can lead to temptation. Whilst we’d never encourage you to fritter away your cash, we understand that sometimes you’ll get financial surprises or you just simply want to have some fun – after all, you’re at university and the world is your oyster. Just be sensible, work hard and have a few laughs along the way and while you’re thinking about your finances, double check you’re covered for content insurance and car insurance if you have a car, it’ll give you peace of mind and mum and dad will be impressed – it’s a win, win.