DO take an interest-free overdraft

Forecasts indicate that students starting university in 2012 will graduate with an average debt of £53,000. This means that borrowing is inevitable. It’s therefore crucial to find the cheapest way to borrow this money, leaving you in a position to manage and repay this debt once you leave university.

Student bank accounts offer interest-free overdrafts, typically up to £3,000. Take one, if you can! This is a cheap way of borrowing and makes your living costs more manageable.

DO opt for a tiered overdraft

If you can opt for a tiered overdraft, as is standard with many accounts, do. This will stop you from blowing your entire overdraft in your first year (or even first term)!

Tiered overdrafts often mean that you can apply for a certain amount in the first year that will increase by a few hundred pounds each year of your course.  Some banks even set your overdraft so that it increases each term.

This will just help you to manage your spending and ensure that you don’t make the mistake of spending it all at once.

DO speak to your bank!

If you are in financial trouble, it’s worth speaking to your bank. This is particularly important if you’re reaching the overdraft limit and are concerned that you might need more cash to live. They would rather hear from you and discuss your bank account and overdraft limits than for you to just take out more money than you should. Banks have student advisors in place to help. Use them.

DON’T exceed your authorised limit

Yes, student accounts will almost all give you an interest-free overdraft. But if you exceed the agreed limit, their generosity is likely to end. You will almost invariably find that you incur interest charges on any amount of overdraft outside of your agreed limit. So while the cash machine might let you take out more than your limit – you will end up paying for it!

DON’T think of it as “free money”

It’s all too easy to just withdraw and withdraw knowing that your overdraft is there to back you up when the Maintenance Loan runs out. An interest-free overdraft doesn’t mean ‘free money.’ As soon as you graduate you could incur interest on the overdraft. Think of it as a loan because you will have to pay it back eventually.