For this year's students, the financial lessons are only just beginning

The scramble is on for university places. Thousands of A-level students will be sitting nervously this week waiting to see where and what they will be studying over the next three or four years. But among the confirming of offers of places made and the merry-go-round of clearing, students should not take their eye off who will they will be banking with at university and beyond. With the cost of tuition set to soar and graduate debt frequently breaking the £20,000 mark, now is more important than ever for university students to select the right bank account.

Financial experts and graduates alike are in agreement that the basic necessities, rather than the bells and whistles, are what count with a student account. Free iPods and music vouchers may be appealing in the short term but if funds begin to dry up, the size of an interest-free overdraft will make all the difference.

While most students will be eligible for a student loan during university, the rising cost of living, and of education, means an interest-free overdraft can often become a lifeline unless additional funding from parents or relatives is guaranteed. Having a pot to dip into for rent, living costs or tuition fees can be immensely helpful, but it is important to look at the charges for authorised and unauthorised withdrawals as well.

At the moment, the largest interest-free overdraft on offer for a student bank account stands at £3,000 and is available from both the Bank of Scotland's and Halifax's student current accounts. For withdrawals authorised above this amount, both banks charge 7.2 per cent EAR and for unauthorised withdrawals significantly more at 24.2 per cent EAR.

By contrast, the HSBC and Santander student accounts provide overdrafts of £1,000 in the first year of university, which rises incrementally to £2,000 by the fifth year, if the course runs that long. However, neither charges interest on authorised withdrawals. For unauthorised withdrawals, HSBC charges a typical 3.5 per cent EAR and Santander charges 28.7 per cent.

drive from www.independent.co.uk