Kris Rao is an official provider of services to meet student welfare needs at Reading University. He has produced a range of informational leaflets and booklets for the international students who study there.
Careful financial planning is necessary for a productive student life in the UK. Students – a group with high expenses and limited income – are famously needy. To paraphrase Errol Flynn, students’ problems lie in reconciling their gross habits with their net income. Money and finance in Britain could be quite different from other countries and a good working knowledge of them should make your student life hassle-free. Remember, this is probably the first time that you have lived away from your family and the first time you have had to manage a budget of your own.
Although students aren’t expected to make much money, financial woes could impede your academic performance. It could also land you with large and unnecessary debts, which could affect your later working life.
Money is an important business for all students, but foreign students can have an additional problem: dealing with two currencies, expenses in pounds but receipts in another currency. You could plan your expenses properly, but through no fault of your own have budget upsets due to foreign exchange rate swings.
BRINGING MONEY FROM HOME
Do not bring large sums in cash as this can be dangerous. A small amount in pounds to cover your initial expenses for at least a week should be sufficient. It is advisable to bring large sums of money in the form of a sterling banker’s draft, Sterling travellers’ cheques, or you could transfer money after you have opened a bank account in the UK.
It is very useful to have a bank account whilst studying in the UK and it is important to choose one carefully. It is cheaper to have a UK bank account to manage your expenses in the UK, to have your wages paid into if you want to work and for immigration purposes if you need to extend your visa in the UK. Also, before you depart for the UK, check with your local bank whether they have any agreement with banks in the UK, how easy it will be to transfer money from your country and whether or not there are any charges.
Choosing the right bank
The four major banks that control nearly two thirds of current accounts in the UK are HSBC, Royal Bank of Scotland/NatWest group, Barclays and Lloyds TSB. Other banks are HBOS (Halifax Bank of Scotland), Co-operative Bank, Abbey and the Alliance & Leicester. Besides these, there are regional banks in Northern England, Northern Ireland and Scotland. They are: Yorkshire Bank, Northern Bank, Ulster Bank, Bank of Ireland and Clydesdale Bank.
Most universities will have at least one or a limited number of banks on campus. Do not go to the first bank you come across. Shop around. Check the bank stalls during the freshers fair. Look into their interest rates, charges, and the facilities that they offer. Check how far the branch is from your campus or home. Ask other students who have bank accounts before you make your choice.
Types of account
Banks in the UK offer various types of account. The main two types are current accounts and savings accounts. Current accounts are ideal as they have no restrictions on deposit or withdrawal of funds. A savings account may have some restriction on the withdrawal of funds but will offer a higher rate of interest. If you have a large amount of money then it is worth putting most of it into a high-interest savings account and transfering it to your current account according to your requirements.
Interest and facilities
All banks offer a free current account facility which means you should not pay anything provided you are in credit. Most banks offer minimal interest on money in the student account. At present, interest rates offered vary from 0.10 per cent to 0.25 per cent. However, Halifax Bank of Scotland (HBOS) and Alliance & Leicester offer around 3% interest if the minimum deposit or balance per month is over £1,000.
Most banks have now stopped offering incentives to foreign students to open a student account with them as they see foreign students as non-profitable. Currently, HSBC offers the best deal to overseas students. Students get a Young Persons Railcard valid for four years (worth about £80) or £50 in cash when opening an account, the facilities of a Switch/Maestro card (debit card), cheque guarantee card, a chequebook, credit card and interest-free overdraft (depending on how your account is run). Nat West and the Royal Bank of Scotland offer a Solo card (debit card), chequebook, and credit card after six months but no overdraft facilities to international students. Barclays and Lloyds offer a current account Visa Electron card (debit card), but no chequebook or overdraft facility. Both Barclays and Lloyds TSB permit overseas students to apply for a credit card after two years of running a current account. Some banks’ facilities, including Barclays, Lloyds TSB, the Co-operative Bank and Alliance & Leicester, can also be accessed through post offices located throughout the country.
All banks now offer free telephone and internet banking which is worth having to check real time balances, to transfer money and for the day-to-day management of your finances.
Unique to Britain, Building Societies are owned by the customers (members). They do not offer any student accounts but students are allowed to open a normal account with them. They offer a slightly higher rate of interest than the banks and are non-profit making. Popular building societies in the UK are Nationwide, Leeds and Yorkshire.
Banking systems and charges
Banks and building societies in the UK are generally open from 9.30am to 5.00pm, Monday to Friday, and some open from 9.30am to 12 noon on Saturday. These are the standard opening times. Some banks are open all day on Saturday as well. High street branches will operate full banking facilities while branches on campus might offer limited facilities. Cheques usually take around three to five days to clear. The quickest and most convenient way to pay your bills is by direct debit.
Not all banking facilities in the UK are free. Setting up direct debits, standing orders and paying in cash or by cheques are all free. Withdrawing money from your UK bank account from most cash machines is also free. However, do bear in mind that there are fee-charging cash machines located in some shopping centres, post offices and night clubs. These charge around £1.50 per withdrawal. You will be advised on screen before the withdrawal about the charges and you can cancel the transaction. You can also withdraw money through the cash back facility offered by most retailers when you pay for goods or services by UK debit card. The minimum cash back is £10 and the maximum allowed is £50.
Other charges vary from bank to bank and it is worth checking with them before you use the facilities. There will most likely be charges for the misuse of bank accounts, such as going overdrawn without funds in your account. Missing a direct debit and standing order can also bring a high charge – around £30, plus interest. If you are charged for misuse then talk to the bank and explain to them the reasons. They may waive the charges. Banks also charge for other services they offer. These include sending money abroad, purchasing a bankers’ draft and the processing of foreign cheques.
Chip and PIN
Almost all retailers now accept Chip and PIN cards in the UK. When paying for purchases your card will be inserted into a verifying machine. Instead of signing you will be asked to enter your PIN number using the key pad. If your card does not have the Chip and PIN facility then you will have to sign the receipt and hand it back to the retailer.
Opening a student account
Opening a bank account is very straightforward. Contact your local branch and ask for an appointment with a customer services adviser. In some branches you may be able to see them straight away. You will need to take the following with you to the branch:
- Your passport or your National Identity Card (If you are an EEA national).
- A letter confirming your student registration from your college or university. This needs to be addressed to the bank manager of the bank you wish to open an account with.
- Your proof of address. This could be a letter from your hall office, a letter from your university, a tenancy agreement if you live in rented accommodation or a utility bill with your name and address on it. Some banks will also ask for proof of your address in your home country and statements from your bank account.
A customer services adviser will ask you a few details before the account opening process is completed. You’ll receive your cash or debit card, PIN number, cheque book and account details by post around five days later. You might encounter some difficulties or a slight delay in opening a bank account if you are in the UK for less than six months or are under a list of nationalities that require further money laundering checks.
List of banks and their contact details
GLOSSARY OF BANKING TERMS
Automated credit transfer: A method of direct payment to your bank account instead of paying by cheque or cash.
Automated teller machines (ATM): Also known as cash machines, these allow you to withdraw money and perform other account functions using your debit, credit or cash card.
Balance: The amount in your account at any given time. This can be in credit or overdrawn.
Cash card: A card issued by your bank to allow you to withdraw money from your account. However, you cannot use it as debit card or to guarantee cheques.
Charge card: Similar to a credit card but the account holder receives a statement at the end of month which he or she has to settle in full.
Cheque guarantee card: A facility available on some debit cards. Cheques are guaranteed by the bank up to the monetary limit displayed on the card.
Cirrus: Cirrus is an international network of cash machines that allows you to withdraw money in different countries.
Credit card (Amex, JCB, Diners, MasterCard or Visa): A card through which you pay for goods and services by credit.
Current account: Similar to a checking account. A bank account that is normally used for daily transactions (for example, making payments either by a debit card or cheque, direct debits and standing orders). This type of account pays little interest but has no restrictions on withdrawal or deposits.
Debit card (Switch/Maestro, Solo, Visa Delta and Visa Electron): A card through which you can pay for goods and services. The money spent is automatically withdrawn from your account.
Direct debit: A payment from a bank account arranged by the receiver with permission from the account holder.
Interest: The charge made to you if you borrow money or the income you receive if you invest it in a bank account.
LINK: LINK is a British network of cash machines that allows you to withdraw money in the UK only.
Maestro: An international payment system that allows you to pay for goods and services using your debit card.
Overdraft: A facility through the current account that permits you to borrow up to an agreed amount for an agreed amount of time.
PIN: A personal identification number issued by the bank for use with a cash card, credit card or debit card.
Savings account: An account with a bank or financial institution which pays higher interest rates on balances held. The amount of interest depends on the amount of money in the account and the notice period required for withdrawals. In most cases the longer the notice period, the higher the interest rate.
Store card: Store cards are very similar to credit cards but are issued by retail stores. Their use is restricted to the stores that issue them. They charge a higher rate of interest, usually around 25 per cent.
Standing Orders: An instruction by a bank’s customer to the bank to pay a regular amount of money into another account.
Visa Plus: An international network of cash machines, managed by VISA, that allows you to withdraw money anywhere in the world.