[Salmaa!]

Why do most of the banks offering student bank accounts advertise interest-free overdrafts? I thought it was a bad thing to get an overdraft, and that it's spending the bank's money, not yours, which you then have to pay back.. Are students MEANT to use them?

[HeyyImRyan]

interest-free means you only pay back what you've taken which isn't too bad I suppose. I think it's terrible for banks to offer it though, it lets some students get into the habit of overspending and paying it back...which won't be a good thing at all once they start having to pay interest.

Personally I'll never use one, spend the cash you have - not the cash you don't. I suppose when they're interest free it's not too bad, but if you get into a bad habit now then it may be hard to tackle it later on when you'll be paying pretty extensive interest on whatever you spend.

[Mr Dangermouse]

Stops you getting in to serious financial difficulty when you're in uni. Rightly or wrongly people don't tend to worry about where the world takes them after their degree finishes. Just the way it is.

[LuisSuarez7]

No students don't have to use them, an overdraft is there in case your student finance money isn't enough or your a bit short for whatever reason. They are interest free to try and entice people to open an account with them. I wouldn't say its a bad thing thing to have one (I do) but you just have to be careful not to go crazy and blow the whole overdraft in case you need some funds or then struggle to pay it back.

[SOZLAD]

when i have trouble making ends meet i'd rather go into my overdraft for a few weeks until i can pay it back than take out a loan with interest

[tehforum]

(Original post by Salmaa!)
Why do most of the banks offering student bank accounts advertise interest-free overdrafts? I thought it was a bad thing to get an overdraft, and that it's spending the bank's money, not yours, which you then have to pay back.. Are students MEANT to use them?

Interest-free.

Clue's in the name.

[Bobifier]

It is common for students to be sufficiently low on money that they actually don't have enough. In these cases they need an overdraft, and it is obviously good for them to be able to have one that is interest free.

[Steezy]

Stay out of all debt as much as possible, but it's handy if you're really struggling.

[rifle.eyes]

(Original post by Salmaa!)
Why do most of the banks offering student bank accounts advertise interest-free overdrafts? I thought it was a bad thing to get an overdraft, and that it's spending the bank's money, not yours, which you then have to pay back.. Are students MEANT to use them?

Because student loans don't always cover everything. Plus if you go over your overdraft limit (which as a skint student this is a distinct possibility) the bank charges you fees and makes money for itself.

Student overdrafts are probably the best overdraft you'll ever get, up to £1000 overdraft and no fees unless you go over that limit. Don't feel guilty if you end up dipping in to it, a lot of students do, especially just before loan payment day.

[Jelephant]

Most students will have financial issues at some point. Having an interest free overdraft is much better than running out of money and starving, or having to pay huge fees on an unplanned overdraft. Without my overdraft I'd have problems paying rent over summer when I don't have loan payments coming in, and as it's interest free I don't have to worry about paying back more than I borrowed. Obviously it's not there to blow on drink and 60" TVs and whatnot, but ultimately it people's decision what they do with it, and their own responsibility to pay back.

[Salmaa!]

(Original post by tehforum)
Interest-free.

Clue's in the name.

Cheers for that patronising reply, but that wasn't what I was asking:

(Original post by Salmaa!)
Are students MEANT to use them?

Clue's in the question.

[catestevenson]

For those in case of emergency moments and because normal current accounts charge you an extortionate amount! I have a regular current account accidentally went 50p overdrawn for two days (online service had wrongly charged me) and I got charged £20 for it. I wasn't impressed.

[Nightstar-27]

So you can overspend without paying interest to attract students to join with them most of whom won't change banks later. You don't have to sue them though, I haven't used mine and tbh I find the people that mostly use it are just being very careless with their money (buying crap they don't need and going out a lot). I've not met anyone who needed it for any other reason yet but I'm sure they exist. Just don't get into the habit of using it, which is what I think the bank secretly wants as then later in life you'll go into it and have to pay them interest as well.

[anaplian]

Free money.

[somethingbeautiful]

(Original post by HeyyImRyan)
interest-free means you only pay back what you've taken which isn't too bad I suppose. I think it's terrible for banks to offer it though, it lets some students get into the habit of overspending and paying it back...which won't be a good thing at all once they start having to pay interest.

Personally I'll never use one, spend the cash you have - not the cash you don't. I suppose when they're interest free it's not too bad, but if you get into a bad habit now then it may be hard to tackle it later on when you'll be paying pretty extensive interest on whatever you spend.

I wouldn't say it was terrible of the banks. Overdrafts are very useful if they are used responsibly. For example imagine you're a uni student and you have £2000 in your account which covers your cost of living (food/drink/clothes). Your rent of, let's say £3000 (for a whole academic year in halls - 52 weeks) is due to be deducted from your bank account on the 10th of the month (my uni does it this way - deducting the whole 52 weeks at once). However, your student loan which covers this doesn't come into your account until the 17th of the month - you cannot ask them to move it forward a week in order to pay your rent and you cannot ask your uni to delay your rent deduction for a week - life doesn't work like that unfortunately - having the cash is your responsibility and not your landlord/accommodation providers. With a student overdraft (no interest) of £1000 this is no problem. When the rent day arrives it will automatically take £3,000 from your account leaving you £1,000 overdrawn.
Then when the loan of £3,000 arrives on the 17th it will clear your £1,000 overdraft and you'll have £2,000 to live on.

Without the student overdraft you would simply be in £1000 unplanned overdraft plus you must pay 7 days worth of interest. That's why student accounts with interest free overdrafts exist. They aren't there so that Tom, Dick and Harry (whoever they are ) can go and get pissed or buy clothes and then realise once they graduate that they owe their bank a load of money. So if you use an overdraft responsibly it is very useful.

It is even more useful as a graduate when you have various bills coming out on different days and pay day hasn't come around. Again - use it sensibly and not on shoe shopping etc.

So to say that banks ought not to offer overdrafts to students is silly because it discriminates the vast majority who are capable of using them sensibly. Just because some people who blow their overdraft on rubbish get themselves into debt does not mean that banks should not provide overdrafts to students at all.

[MehMachine]

All the student bank accounts currently on offer give you a 0% overdraft service. This is very generous as usually with non-student current accounts you are required to pay a service charge to the bank to have this facility. Overdrafts run in size from £200-£3000.

Most banks have guaranteed limits they will give you if you are able to open a student account. Beyond those limits you have to go in and have a chat...

Overdrafts are useful to have even if you don't think you'll ever need it at university. Sudden unexpected social or physical changes in your circumstances might necessitate you having a sudden expenditure you haven't seen coming. This means if you dont have an overdraft and no available lines of credit you will have to face head on with no escape whatever that may be: Phone bill, laptop/contents insurance, accommodation instalment... Paying those things and not officially being late with a payment will allow you to maintain a good credit history. In the practical sense it is a very short term loan, but the banks are supposed to be understanding of your situation...

Also, what I would say, is go with a bank that offers good customer service to you and not just the best overdraft deal. Additionally, be smart when looking at overdrafts... A lot of people are drawn in by huge guaranteed limits (like the co-op), however to so freely give out that large credit limit. The credit checking for the account will be high... So by proportion, more people will get turned down than if you go for a smaller overdraft account with the option of pleading your case to increase it. (e.g. Barclays and HSBC).

Meh,

[cat_in_the_hat]

My overdraft was a life saver for the beginning of my first year. Student finance messed my claim up and I didn't get my loan until Christmas time, so I had to live off my overdraft. Just because you have one doesn't mean you have to use it, but I don't think you should feel too guilty if you do as it's interest free. Also your uni years are a good time to train yourself in managing your money.

[cat_in_the_hat]

Also I have friends who have to pay their own rent and have had difficulty getting work, and their student loan doesn't stretch that far, so the overdraft is pretty essential.

[LemonLizards]

It's great. The student loan in general often doesn't cover the fees for uni (i.e. maintenance fees). So with an overdraft, you've got a bit of leeway. It also means you can go into that overdraft and then work in the summer when you're not busy thus not struggling for money in the second, third, fourth year.

[Camoxide]

It's great for when you're approaching your next set of loans and grants at which point ive usually ran out of money.