Terms of indebtedness

You've got your A-levels and a university place. Now you need a bank.

The uncertainty is over; now the A-level results are out, thousands of 18-year-olds know which university they are heading for this autumn. But for many, the excitement of moving away from home will be tempered by financial concerns.

The uncertainty is over; now the A-level results are out, thousands of 18-year-olds know which university they are heading for this autumn. But for many, the excitement of moving away from home will be tempered by financial concerns.

The cost of a university education is increasing, forcing most students to take out loans and an overdraft. Research from Barclays reveals that student debt is rising by 25 per cent a year. This year, the average debt upon graduation is £4,339.

Student bank accounts are specifically designed to address your needs at university. Terms and offers vary but you should look at more than just who is offering the largest cash incentive, a free WAP phone or CD player. Tempting as these may be, service and location are more important.

It is far better to open an account at a branch close to your university rather than your parents' home. If you are at a campus university there will be banks on site, so when choosing a student account, it is worth opting for one of these.

University branches are geared towards dealing with students, and advisers will be well-versed in the exact details of the student account and what you are entitled to - which may not be the case with a more general branch.

For those happy to bank online, Abbey National and the National Union of Students (NUS) recently launched an online package. Customers can also use telephone and branch banking, although Abbey National has no campus branch network of its own.

"We believe students are the most technology-friendly sector of the population and will be quite happy to bank online," says Matt Young, spokesman for Abbey National.

Abbey National is also introducing a graduate account next March. Each student should have a single point of contact, so they will be able to e-mail or telephone the same person for any advice they need. Some students will continue to prefer face-to-face contact, which the majority of banks appreciate. NatWest, Barclays and HSBC all have specialist advisers in student branches.

"We try and encourage students to build up a relationship with their adviser," says Anne-Marie Blake, head of student and graduate banking at NatWest. "The adviser is there to get to know the student and to help them manage their finances."

Student packages include an interest-free overdraft, the amount varying according to the bank. Banks also have services such as commission-free foreign currency, insurance cover, discount vouchers for books and CDs, and a credit card.

When choosing a bank, it is also worth looking beyond your student years, to the terms on offer when you graduate.

The Halifax doesn't have a graduate package but continues its student package for a year after graduation. After that, customers are transferred to a normal current account.

Barclays gives graduates interest-free overdrafts of £1,250 for two years.

HSBC's graduate package lasts for three years, with the interest-free overdraft limit reducing each year, from £1,500 in year one, to £1,000 in year two and £500 in year three.

Lloyds TSB and Royal Bank of Scotland graduates can have an overdraft of up to £2,000 interest free for up to two years.

NatWest gives customers three years to clear interest-free overdrafts of up to £2,000. NatWest customers can also clear their overdraft and take an interest-free loan instead.

Whatever account you opt for, you should be able to find a good deal. Banks see students as profitable future customers, which is why they fall over themselves to offer increasingly attractive deals to get your custom and keep it.