A Cherwell investigation has revealed that it would be extremely easy for an Oxford student to open several bank accounts at once, opening the door to thousands of pounds of debt from overdrafts and credit cards.
It is against most banks’ regulations for students to hold more than one account, yet several Oxford branches of major banks failed to enforce this rule when approached by a Cherwell reporter.
NatWest, the Co-operative Bank, Santander and Halifax all omitted to ask the reporter whether they already held a student account at another bank.
Only Lloyds TSB and HSBC enforced the rule about multiple accounts, informing the reporter that they would have to close their current student account before opening another.
If a student were to open an account with all the banks which failed to ask if they already had one, they could find themselves with triple the level of overdraft they would receive from a single account.
A first year student making use of the full overdraft at each of the four banks that did not challenge the reporter could have access to £6,400 worth of overdraft.
This figure increases as a student moves through their studies, rising to a potential high of £9,000.
Most banks visited by the reporter asked only for identification, a UCAS letter as proof of study, and occasionally a proof of address before an account could be opened. Even when asked multiple times, they did not enquire about other accounts.
Although most student bank accounts offer interest-free overdrafts, rates usually soar as soon as the account holder leaves university. This means that someone holding multiple accounts in Oxford could find themselves facing severe debt within months of graduation.
Student bank accounts also frequently allow the account-holder to have a credit card with a limit of up to £500. Using the four potential bank accounts Cherwell identified in Oxford, this could add an additional £2,000 worth of debt.
The Co-operative Bank, which is near the Westgate Centre, offers a £1,400 overdraft for its first year student accounts. The reporter was told that their student loan would not even have to be placed in the bank account in order for them to use it and access the overdraft.
NatWest, which has branches on the High Street and Cornmarket Street, offers a starting overdraft of £1,500, which rises to £2,000 as a student moves through university. They also offer credit cards with a limit of £500.
First year students can claim an overdraft of £1,000 from an account at Santander, and up to £2,000 in following years.
Halifax, whose Oxford branch is in the Westgate Centre, offer a starting overdraft limit of £1000 in the first year. Their maximum limit rises to £3,000 over a period of five years.
None of the banks approached by Cherwell chose to comment on the problem of multiple student accounts.
However one second year student commented, “Almost everyone I know with a student loan went into their overdraft in their first year.
“It’s really scary how easy it is to get into loads of debt.”
It is in fact not possible for banks to know whether students hold accounts elsewhere, but their omission even to ask is a serious failing.
Advice to students on the website moneysavingexpert.com said, “When applying you can either be honest and tell the bank you have a student account elsewhere and risk being turned away, or you can lie to them if they ask you. It’s your choice.”
A number of the banks also offer additional incentives to lure students into opening accounts. NatWest offers free Young Person’s rail cards, while a Lloyds TSB student account comes with free membership of the Youth Hostel Association.
Santander offer mobile phone, gadget and laptop insurance, HSBC offer free travel insurance, and Halifax provide 25% off AA breakdown cover.
Only The Co-operative offer no discounts or freebies with their student current account.
With student debt set to rise considerably in coming years, the problem of multiple accounts and finance mismanagement is likely to become far worse.
A second year student from Christ Church College said, “It’s really embarrassing, but I just find it too daunting to try and keep track of my money – Oxford is an expensive city to live in.”
