Interest free student account overdrafts. Irresponsible?

BunnyKillBot

BunnyKillBot

BunnyKillBot

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Is it just me, or does the standard practice of offering sizeable interest free overdrafts to students seem allot like getting them hooked on crack, then withdrawing their supply unless they perform certain 'favours' and suddenly you're a hooker selling yourself to keep your pimp from breaking your legs and stealing your baby?
 
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no, they bring the interest rates in gradually after they cease to become a student, this is a totally moot point. Plus the interest on a student overdraft, which is a max £1500 overdraft i believe, works out to be around £14 a month once they've completely removed the interest free amount on the account - hardly leg breaking time; this is assuming that they actually have a job and are earning £1500 a month and spunking the lot each month.

By gradually bringing it in i believe the first year out of uni is still interest free. The year after only 1K is interest free, then the next year only .5k is interest free, then the year after none of it is interest free; or similar.

B@
 
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B@Th*nG said:
no, they bring the interest rates in gradually after they cease to become a student, this is a totally moot point. Plus the interest on a student overdraft, which is a max £1500 overdraft i believe, is about £14 a month once they've completely removed the interest free amount on the account - hardly leg breaking time.

By gradually bringing it in i believe the first year out of uni is still interest free. The year after only 1K is interest free, then the next year only .5k is interest free, then the year after none of it is interest free; or similar.

B@
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Yes thats all well and good, but the question is one of debt-living being the norm, not the exception. How many students use the overdraft as a safety net for when budgeting doesn't quite match up, i.e. a rent payment is about to be missed, and how many use it as a debt-living zone, i.e. where -£1500 is the new zero. Zero is zero and always should be, but this readily available debt model starts to imply a different level of zero.

I suppose one could argue its a useful tool to teach about debt in a relatively safe environment where the amounts are still comparatively low. But still, genuinely interested.
 
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I think a far bigger issue from a few years back was the vast amount of junk mail that I'd receive with pre-approved loads, pre-approved credit cards and massive invitations to jump into £5k per loan/card of debt, without any consideration of whether you could ever pay it back or not!

There's a few members on this forum who's financial lives read somewhat similar, earning low wages at 18-19 but having the latest cars, clothes, TV etc but then suddenly waking up and realising they're 30k in debt and nothing to show for it!

Or are other people still getting this junk mail and its only me they're ignoring because I never took out a single loan?
 
BunnyKillBot said:
Yes thats all well and good, but the question is one of debt-living being the norm, not the exception. How many students use the overdraft as a safety net for when budgeting doesn't quite match up, i.e. a rent payment is about to be missed, and how many use it as a debt-living zone, i.e. where -£1500 is the new zero. Zero is zero and always should be, but this readily available debt model starts to imply a different level of zero.

I suppose one could argue its a useful tool to teach about debt in a relatively safe environment where the amounts are still comparatively low. But still, genuinely interested.
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if you're a student it's near certain that, unless you're living at home or have rich parents, that the £1.5k overdraft is effectively an interest free loan and it definitely IS the new zero.

However, interest rates are there to ensure long-term use is unattractive.

B@
 
Used mine as a safety net through the course, paid for camera kit to learn photography on the side then extended it at the end to cover moving and getting a car/insurance for work. All of it paid off 3 months before they started charging interest. Certainly made it a lot more comfortable not having to worry about the fees if I didn't have an arranged overdraft. This was back when it was easy to get 4k interest free from the banks.
 
B@Th*nG said:
if you're a student it's near certain that, unless you're living at home or have rich parents, that the £1.5k overdraft is effectively an interest free loan and it definitely IS the new zero.

Interest rates are there to ensure long-term use is unattractive.

B@
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EXACTLY, so by not having any penalty for going bellow zero, you are conditioning young people to live bellow the debt line.

And remember, most full time students are unlikely to be working to fund their course, so the only money they have coming in is student loan or parental support. Ie, by going bellow zero, they are using a loan to pay a loan.
 
but there is a penalty... in a few years time. Are you suggesting that students pay interest on their overdrafts or that they have no overdraft facility at all? not great if you're not already loaded is it...

most students work too, unless they live at home or have rich parents. they just work part-time.

it might not be the perfect solution but unless you can propose a better alternative which in no way penalises those who are worse off then it's a bad idea.

B@
 
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B@Th*nG said:
but there is a penalty... in a few years time. Are you suggesting that students pay interest on their overdrafts or that they have no overdraft facility at all? not great if you're not already loaded is it...

most students work too, unless they live at home or have rich parents. they just work part-time.

B@
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How many naive, impressionable 17/18 year olds are considering their future fiscal viability while chugging shots of sambuka from the belly button of a third year who should know better?
 
Tbh you've just come out with a £15k student debt, the extra £1500 from the interest free overdraft is nothing in the grand scheme of debt living normality...

And that was before the fees went up...
 
Trying to get them hooked on on credit is exactly what it is.

But its no more irresponsible than a 12 months 0% credit card, and suggesting that is so because of the average age of a student is quite wrong.
 
BunnyKillBot said:
How many naive, impressionable 17/18 year olds are considering their future fiscal viability while chugging shots of sambuka from the belly button of a third year who should know better?
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I lol'd. :D

0% overdraft is a golden opportunity for some deficit banking. Turn the argument on its head and you can say that the facility is a golden opportunity to anybody with a wee bit of sense.
 
Amp34 said:
Tbh you've just come out with a £15k student debt, the extra £1500 from the interest free overdraft is nothing in the grand scheme of debt living normality...

And that was before the fees went up...
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15k Is no where near the debt level that students will now be coming out with..
 
Amp34 said:
Tbh you've just come out with a £15k student debt
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I wish! I'm gonna come out of uni close to £50k debt, £27k on just tuition fee's.

When I started uni 2 years ago I had no savings and my mum doesn't have the money to help much, spent close to £1000 of my overdraft before I even went what with needing a laptop, deposit for halls etc, I'd be screwed without my overdraft to be honest.
 
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