Going to university or being a student in general can become very expensive, very quickly. The student overdraft is usually offered to students who open a student bank account. This overdraft can be offered for an amount of up to £2,000, with zero percent interest. Sounds good, doesn’t it?
Let’s debunk a few myths about the student overdraft, and student account while we’re at it.
You do not have to have a student bank account in order to receive your student loan
- Your student loan can be paid into your current bank account, even if it is not a student account
Your student overdraft may be 0% interest – this does not mean it is ‘free money’
- Zero percent interest is referring to the fact that while you are studying, you may not be charged for using the overdraft. However, let’s say you use £2,000 of the overdraft offered; you still owe the bank £2,000
The student overdraft is not 0% interest for life
- Once you finish university, if you have not paid off your student overdraft, make sure you switch to a graduate account. The graduate account gives you a little bit longer to pay off your overdraft, some at a zero percent interest fee.
You do not have to take the overdraft
- The overdraft is offered, this does not mean that taking it is a must. If you budget well and plan your spending, you may not need the overdraft. The overdraft could possibly be taken as a safety net, just in case you are going through a rough patch.
You should only use the student overdraft, or any overdraft for that matter, if it’s absolutely crucial. Also, try to not become reliant on your overdraft as you may fall into the habit of using it as if it is part of your income.
Aim to pay off your student overdraft before you graduate. You can do this by improving your money management – through this you may find that you don’t even need to use it by doing things such by reducing your expenses and factoring the repayment into your budget.
Overall, you may not need the overdraft if you manage your money well, by budgeting and other means. Only use and take it if you really need to.