First and foremost, make sure you have properly researched your bank account before applying. Generally the best accounts are those that offer a 0% overdraft that lasts for as long as possible. Do not be suckered into the freebies in the student union during fresher’s week, getting you to sign up for a bank account that may well not be the best for you.
Once your account has been opened, be aware that you will have to apply for the overdraft each year so it’s time to start a good habit for the future by keeping calendar alarms (this is especially so with any savings accounts and ISA’s, making sure that you transfer year on year to ensure that you have the best rates of interest for your money).
Once you have been accepted at your chosen bank and you have your 0% overdraft, make sure you keep to your budget and stay within the limit. Banks will charge extortionate amounts if you happen to go over the overdraft and this can mean that for each transaction over the agreed amount you could get charged with a whopping £25 per transaction. If you don’t have a part time job or any financial backup from your friends and family, you may struggle to get out of that vicious cycle of bank charges once you’re in. If the worst has happened then don’t hide your head in the sand, walk in to your local branch and ask for a meeting with the manager, hopefully some agreement can be made to have an extension.
Some banks do offer services that should help you keep on top of your spending such as text alerts to inform you of your bank balance and alerts when you are approaching your limit. Llyods TSB current accounts have a useful money manager feature which automates your transactions into different categories, such as household bills, food shopping and cash withdrawals, so you can see exactly where your money is going.
If you are coming to the end of your studies then you’ll need to start looking at post graduate accounts, these are still in your favour as they will usually have the 0% overdraft facility attached for at least a year after graduating. There is no need to stay loyal to your bank just because they saw you through your studies, if a competitor account provides the best account for your needs then by all means transfer to their graduate account, if not then get researching and get moving.
In addition to regular banking there are the dreaded credit cards that you’ll probably be bombarded with applications for. If you going down that route of spending money you don’t have (tut tut) then make sure you get a card with 0% interest on new purchases that lasts for a few good months at least. Once the 0% interests period runs out, you can always apply for a new card with a balance transfer of 0% interest and do the same each time the zero interest period comes to an end, but eventually you will have to clear the balance and swapping credit card companies all the time may harm your credit rating.
Speaking of credit rating, this is the point where it’s possible to have difficulties, because young people have no or limited credit scores it may prove hard to get a credit card but once you’ve got one and as long as you look after it responsibly (I mean the debt not the card) then it will help for your future applications for credit. Thinking to the future it may well be hard to get a mortgage or finance on a car if you’ve managed to get through life without taking on any debt and proving that you can pay it back.
Again make sure it’s the card for you, whether it’s one with 0% on spending or if need be then 0% on balance transfers. Again there is no point to be spending on debt, so if you have debt elsewhere that you are being charged for monthly then get it moved to a credit card and start a direct debit to pay it back each month. Make sure you do this one part as it is easy to forget to arrange for payment to be made from your bank account, a direct debit will automatically be taken, better that than being charge for no payment. And most importantly by paying back each month it shows the banks that you can make your payments and so you are a trusted client.
There are many ways to manage your bank accounts but one good idea is to arrange your direct debits and standing orders to leave your bank soon after you have money going in, this means that those important charges can be paid without fear that there may not be money in the account. In that case you may well be charge at either end of the transaction.