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How to handle your finances

Stay out of the red with our guide to looking after your finances during your student days

As a student you’re going to be bombarded from all directions with the latest offers and ways to spend your money, but beware some offers may not be all they appear to be. With so many options, it can be hard to tell the good from the bad and the ugly, so let us help you.

What to get your hands on

There are some financial facilities designed for students that are a safe bet, they’ll help you stay in control of your money and won’t woo you with empty promises.

Interest-free overdrafts

  • This is an incredible feature of some student bank accounts. An interest-free overdraft prevents the bank from charging you interest if you go overdrawn. This means that you have a chance to sort out a way to get money back into your account without being charged. But it’s not a good idea to live in your overdraft, because soon enough you’ll find yourself at your overdraft limit without a safety net. It might be an idea to give yourself a false limit to your overdraft, say if you have a £500 overdraft aim to never go over £300, that means that in an emergency you’ll still have an extra £200 to play with.

Online banking

  • Online banking allows you to check your account almost anywhere, keeping you constantly up to date with your most recent purchases and balance. Many banks also have the option of mobile banking, sending you texts if you go below a certain balance on your account. 

Graduate accounts

  • The perks of a graduate account can range from store discounts to an interest-free overdraft for up to three years after graduation. They are incredibly helpful to those either just starting out their financial independence or working their way up to financial stability. 
  • When setting up your student account, shop around to see who has the best deals (and not just the best free gifts), and go to your chosen bank knowing exactly what you want. Specifically mention features such as interest-free overdrafts and the opportunity for a graduate account, and you will end up saving yourself hassle and potential debt.   
  • If you need more information, moneysavingexpert.com has a useful guide to choosing a student bank account.

What to watch out for

Until you’ve been financially stable for a while, it may be best to stay away from credit cards, store cards and using too much of your overdraft.

Credit and store cards

Both of these may seem like the solution to a number of problems.Your favourite shop offers you a 20% discount if you take out a card and it seems too good to be true. But if it seems too good to be true, it probably is. Always read the small print and, as with credit cards, try to pay the amount of money you owe off in full each month, so you do not pay additional interest. 

Likewise, credit cards may seem like a saviour at the time of purchase, but spending on a credit card is often spending money that you don’t have. They are a good idea if you need help managing cash flow and use them to defer payments, but always try to pay off the amount you owe each month in full. If you continue to add purchases to credit cards and you don’t pay off the full amount each month, then you will rack up additional interest, and the amount you owe will go up every month. If the end of the month comes and you are unable to pay your credit card bills, you can damage your credit rating, making it difficult to get a home or car loan later on. 

Until you feel you are ready to handle this responsibility, do not take out a credit card.

Overdrafts

It can become second nature to pull out your card for every purchase you make without even thinking about the possibility of running out of money. But small purchases add up. An overdraft is essentially a loan the bank makes when you make purchases without adequate money in your account. If you haven’t got a 0% student overdraft that covers your spending, these can carry very high interest rates, meaning the longer you wait to pay them back, the more money you will owe.

If you do overdraw your bank account, be sure to call the bank and pay back the amount owed as soon as possible. Be careful to monitor your account regularly as you will get charged every time you go overdrawn if you have not previously agreed the overdraft.

For more information on credit cards and managing debt, UCAS offers useful resources, and moneysavingexpert.com can help you choose the options for you.

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