With more people going to university than ever before, finding sources of funding for their education has become something of a dilemma. As a result, students have been forced to take out large loans in order to cover the cost of their tuition fees and to pay the price of living in a university city, which is often rather high.

As well as taking out loans, many students receive a maintenance grant. This is an amount of money, received from the government, on an income assessed basis, that is meant to help towards living expenses while at university. This, coupled with the money from the Student Loans Company, means that students have a lot of cash coming into their accounts at the start of term. However, by the end of term, many students find themselves considerably overdrawn. To accommodate this fluctuation in individual student affluence, many banks offer specialised student accounts, coupled with a number of incentives.

HSBC have offered students things such as MP3 players and CDs to students that sign up with them. Natwest offer a free Young Person’s Rail Card for five years, worth . This sort of thing certainly does the job of attracting students to these banks. However, is it really the free gifts that students should be looking at when considering who to bank with? Probably not.

The level of interest-free overdraft offered, should probably factor more prominently in the decision making process. If this is the primary consideration, then Halifax comes out as the clear winner, with an interest free overdraft of up to 0 in the first years. There are no freebies with this account but the overdraft is more than double what a lot of banks offer. Thrifty students will see an opportunity here.

Open a high-interest online savings account and transfer your overdraft money into there. It means the money will be earning for you but it is not quite as inaccessible for you if you need it, compared to how it would be if you had put it into an ISA. In this way the interest you collect will be reward enough. Alternatively, collect your free gift and do exactly the same with the smaller interest-free overdraft offered by the other banks.