Banks offer attractive incentives, but undergraduates should not be swayed by freebies alone, writes CAROLINE MADDEN

THE CLASS of 2009 will no doubt continue their celebrations over the weekend after receiving their Leaving Certificate results on Wednesday, but once the CAO offers are issued and accepted over the coming weeks, the pre-college planning will begin in earnest.

In between searching for accommodation and preparing for a gruelling regime of daytime TV, Pot Noodles and all-night parties, college-bound school leavers will also have to find time for those mundane but important tasks like setting up a student bank account.

In recent years, banks became increasingly competitive in their efforts to win the business of young undergraduates in the hopes that they would remain loyal – and lucrative – customers when they graduated from broke students to flush professionals.

Perhaps surprisingly, several banks have continued to invest in this strategy this year, once again offering generous freebies to new student customers.

For instance, Bank of Ireland is offering 20,000 free return flights to new third-level students who open an account with them. The flights leave from Dublin and Cork to nine European destinations including London, Paris, Milan and Berlin.

The free flight vouchers cover all taxes and charges, so for once “free” actually does mean free.

The catches attached to this deal aren’t too onerous. Students have to open their account before October 16th, lodge €5 into it and then use the account five times in October and November.

Ulster Bank has taken a more direct approach and intends to woo new undergrads with cold, hard cash. The bank will give students €100 in cash once they open and use their account. The bank’s student package also includes €100 off selected Toshiba laptops and four months free access to the SquirrelSave online backup facility.

Meanwhile, if first-year students open (or convert an existing AIB account) to an AIB Student Plus account before October 30th, they will receive a voucher for a free student Travelcard, which normally costs €12.

Students will also receive a cash bonus of €50 into their account by January 31st next year, but only if they register with the AIB phone and internet banking service, top up their mobile at least three times using the AIB Top Up by Text service and complete three other transactions on their account by November 30th.

Enticing as these offers may be to cash-strapped students, the Financial Regulator warns against being swayed entirely by freebies.

“Some banks offer gimmicks such as free flights if you open an account with them, but don’t choose an account just for the freebies, no matter how good they are,” advises a spokeswoman for the regulator. “It is important to get a good rate of interest and low fees and charges, so that you can make the most of your money.”

She advises students to shop around for a good interest rate on the credit balance in their current account.

“Also, look at the interest rates charged for other products that you might use in the future like overdrafts, credit cards and student loans,” she says.

Although most student accounts do not have transaction fees, it’s worth checking this with the provider.

Also, anyone who already has a current account shouldn’t automatically accept the student version that their existing bank offers them, but should first check out what else is on offer in the market.

An easy way of doing this is by using the student account comparison available on www.itsyourmoney.ie. This survey reveals, for example, that only two of the five providers pay interest on credit balances in their student accounts.

AIB’s Student Plus Account pays a paltry rate of 0.025 per cent EAR (equivalent annual rate) on credit balances.

National Irish Bank doesn’t go in for gimmicks, but instead lets the credit interest rate of 2.02 per cent on its Freedom account (available to students) do the talking. The other providers do not pay interest on credit balances.

Of course, few students will have huge balances sitting in their current account and will probably be more concerned about the rates charged on facilities such as overdrafts and loans.

Both Ulster Bank and AIB score highly in relation to overdraft facilities. Ulster Bank is offering students an interest-free overdraft of up to €650 upon application, while AIB will provide students with an overdraft on an interest-free basis up to a maximum of €1,500, subject to approval.

Permanent TSB charges a hefty 13.6 APR (annual percentage rate) per cent on overdrafts from its student current accounts, while National Irish Bank charges 9.28 per cent.

Bank of Ireland is offering a nine-month interest-free grant advance overdraft as part of its student package for the 2009/2010 academic year. It is also providing nine-month interest-free travel loans.

Ulster Bank student customers can access discounted loans, subject to eligibility, while AIB is offering a preferential variable lending rate on personal loans of 9.79 per cent APR.

Students and parents looking for more in-depth information should keep an eye out for the regulator’s new student loan cost comparison information, due to be launched at the start of September on www.itsyour money.ie

Top Tips On Managing Your Finances

DO

• Spend according to need, not desire;
• Pay bills immediately;
• Tap all sources of student finance;
• Limit loans – remember they have to be paid back;
• Prepare a budget;
• Keep a constant eye on your bank balance;
• Fill in any holes in your finances with a part-time job, not more debt;
• Try to line up a holiday job with good pay;
• Tell your bank when you need to go into the red, or over your limit, before it happens;
• Draw out only the money you need for the week;
• Take with you the money you intend to spend.

DON’T

• Borrow from friends;
• Ignore debt, as it will only get worse;
• Ignore letters from your bank or creditors;
• Suffer in silence – help is available;
• Try to keep up with the fast set if you can't afford it.
• – (Information provided by Ulster Bank)

OPENING AN ACCOUNT

You should consider the following:

• Fees and charges for the services you use most;
• The network of branches, internet and phone access to your account;
• The interest rate on overdrafts and any related fees;
• Charges for unpaid direct debits and standing orders ;
• Extra charges if you miss repayments;
• Benefits such as a "no-fee graduate account" when you finish college.

– (Information provided by the Financial Regulator)