Scam warning as students open first bank accounts

New undergraduates who are heading to university for the first time are being urged to make sure they have a good student bank account – and to watch out for a new spate of scams. 

High street banks are offering perks from large overdrafts to free cash to entice freshers into opening a student account. 

But picking the right one can make a significant difference to a student’s finances throughout their university years. For most students, a generous, multi-year, interest-free overdraft will be the most useful perk. 

This will enable them to avoid hefty overdraft fees if they run out of cash towards the end of term. 

Among the most generous is the 123 Student Current Account from Santander, which includes an overdraft facility where you do not have to pay any interest for the first year unless you dip into the red beyond £1,500. The limit rises over the years to £2,000 for a five-year course. But break the limit and you pay 39.94 per cent interest a year. 

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

HSBC’s offering includes £100 cashback. It provides a free overdraft of £1,000 for the first year, which rises to a generous £3,000 in the third year. 

Break the limit by £25 and you can expect to pay a hefty rate of interest of 39.9 per cent a year. 

Nationwide Building Society is also among the most generous, and could be a good option for those who prefer the idea of supporting a mutual owned by its members. 

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

There are no overdraft charges for up to £1,000 for the first year, rising to £3,000 in year three. Above these limits it charges 39.9 per cent a year. Students are being warned not to let their guard down over online scams and fraud, which are likely to spike over the coming weeks as they begin their courses.

‘Scammers are all too aware that the three student finance payment periods in September, January and April each year are a prime time for them to try to trick students,’ says Bernice McNaught, an executive director at the Student Loans Company.