Students all seem to be having a wonderful time, going out frequently and spending quite a lot of money. But are they using student overdrafts?
As someone who has just left sixth form, many of my friends are now at university. They all seem to be having a wonderful time, going out frequently and spending quite a lot of money.
As they are not working, I wondered how they could afford this kind of lifestyle. The student loans they have cover food and other necessary items but would not stretch to the amount they are buying.
Of course, some use the bank of mum and dad but many are doing something far more dangerous. Most banks now offer student accounts with a very generous student overdraft. This is not always a bad thing, as if the use of it is properly planned; it can be a helpful financial tool. However, it is a worry how frivolously some students use them now. If you go over your agreed limit you will be hit with additional charges and higher interest rates.
This is fine if you have the funds to repay them by the specified time. However, it can cause stress if you’re trying to stretch your money until your next student loan comes through. As these accounts are given out to any student, it is not clear that they can cause serious financial problems if poorly managed.
This is a bad habit to get into, as you should always live within your means. Also try not rely on overdrafts or other similar short-term loans as a long term strategy. Once you are out of university and hopefully have a job, it may be tempting to still use these sort of loans to tide you over until pay day, as you did at university. That’s when your student loan repayments will come to shock you as well.
It was all very well using it at the time as it seemed just like free money but now it needs repaying, along with those high interest rates on short-term loans you may have taken out. You can see how it may be very easy to get into this situation.