Student Overdraft Facility - No Charge


(Peter Roberts) #21

I think this might be because Monzo don’t want to encourage someone to live outside their means whereas HSBC do (because that leads to more charges / fees for them) :man_shrugging:. I’ll caveat this that I expect a stronger deciding factor for Monzo is the cost - they certainly don’t have the financials in place to bankroll free loans for students atm

Seriously though - the idea that someone with very little regular income should live outside this is quite harmful and can set up people with an unhealthy idea of how debt works for life. Overdrafts are useful as a way to smooth out day-to-day blips but if someone is looking to stay inside one for even a full calendar month then they could have the wrong idea about them

If a student accrues £4.5k of “free” debt over 3 years of education they may well struggle to pay that back upon graduation in time to avoid any fees - which is what the bank wants - it’s in its interest to make sure it lends you a large enough amount that you cannot pay it back


#22

I think school children should be given better financial education to be perfectly honest - that’s a discussion for another conversation though. You get my point that students living outside their means should expect to get burned early on these days. Better than them being later in life and not understanding the fear of having no money when their parents may not be able to help them at all.


#23

I think this is incorrect. HSBC and all the other banks want a highly educated customer (they typically earn more money) and they want the customer for life. Most people aren’t like the minority on this forum that’ll switch banks or building societies every ten days for another bribe. They stick with the bank or building society they’ve entrusted their money to. At the very least their salary will go in there. Unless something like TSB meltdown occurs and there’s a major shake of the trust.


(Jonathon) #24

We can agree on financial education for sure. My first one would be not to get a fee-free overdraft or to at the very least manage it in a very, very responsible way. However, peer pressure is a wonderfully powerful thing and this isn’t always as easy as it sounds.

My second year of university, I opened another bank account with Barclay’s, no overdraft and got myself a part time job. That with my student loan and a change in lifestyle meant I could just about afford to live. Nothing extreme but still, for a few years of my life I just about managed in the (probably stupid) hope I would graduate into a well paid job.

A bank doesn’t loan money for free to be nice. They know what they are doing.


(Peter Roberts) #25

I don’t see our positions as mutually exclusive :slight_smile:


#26

This is a far better TL;DR than I came up with.

And this


#27

None of us are perfect my friend - I’m a million miles from perfect. I lived outside of my means for a long time - I would guess a lot of us do. I accept responsibility for my part in it and struggle to stay in those boundaries every day.

However, through hindsight I can see that there are companies, banks included, that actively encourage people to get into debt and profit from this (and me), and that is wrong. I can only hope that my experience of it, and me banging on about it, can stop other people from going down the same path


(Tom Shorey) #28

My interest-free overdraft with Natwest was one of the main reasons I switched from HSBC. They also offered a free railcard.

Not sure if it’s still a thing, but Natwest gradually reduced my interest-free portion of the overdraft after I graduated. It meant I could gradually pay off the full amount without accruing fees.

It was something like:

  • Graduation: £3k
  • 1 year after: £2k
  • 2 year after: £1k
  • 3 year after: £500
  • 4 year after: 0

#29

Nationwide do this also, it’s why I’m not sure how people have so much trouble when they’re told when the graduate account is switched to and it’ll be decreased yearly.


(Tom Shorey) #30

I must admit I’ve always been savvier with my money than my friends, so I can see some people just not worrying about it and letting it become a problem.

And I’m very lucky to have had the fall back of the Bank of Mum and Dad if it had become problematic.


(Nathan) #31

I’ll admit I used my overdraft as a student with less than proper reasons… :beer::tada:

But had the mindset that I’d rather put myself in 0% debt until i am 28 than have to sit in and manage my money whilst being depressed and stressed.

Necessary evil to enjoy my student life and have zero (or should i say 0%) regrets from it :slight_smile:


(Fabian Whitaker) #32

Also a student and know many people are in their overdrafts even by the end of the first term.

Whilst I don’t think that Monzo should offer an interest free overdraft, I feel getting more students on board should be an aim.
I know a few people who have Monzo cards at uni and even without the overdraft (which baring in mind, the legacy overdraft can still be used alongside a monzo account) the budgeting tools make a big difference to being able to keep track of finances.

I would love to see an advertising campaign targeted at university students and highlighting the benefits of Monzo - in the future the students that join monzo may do so for life :money_with_wings:


(Neil M) #33

Its a culture thing that needs to be changed. It becomes banter to say “oh yeah I’m already into my overdraft but it doesn’t matter because of X” . Until the culture change comes through that its not okay go to into your overdraft massively( a couple of pounds is okay as long as you pay it off). Nothing will change until the culture changes and this is compounded with massively reduced maintenance loans.Its hard to be a student without going into your overdraft


(MikeF) #34

Agreed.

My daughter appears to be an exception in that she hates her overdraft with a passion. As a result she does everything possible to avoid using it. While I fully support the sentiment, as an interest free tool I have no problem with her using it for a week or two to tide her over something unforeseen. We are both clear, however, that if at all possible, she needs to see a clear way out of it before going into it.

I would say she lives very frugally as a result but if that means coming out of student life with a more limited debt then I’m all in favour.


(Becky) #35

I agree with this, I managed to get 3 student overdrafts at £3k each! Spent most of it on pizza and alcohol - absolutely nothing - spent 5 years paying it off after graduating, picking up a default on the way.

If Monzo was about when I was at uni, I’m sure I wouldn’t of got in such a mess!

Offering a student account with no overdraft or loan facilities would probably be the way forward…


(James Prince) #36

Thank You for everyone’s comments. Some very interesting opinions to take on board.


(Fabian Whitaker) #37

Definitely.

Conventional bank accounts are a maze when it comes to student budgeting as there’s no reminders that say ‘actually, you’re spending too much here’ like with the summary, and with an interest free overdraft this gets compounded even further as approaching £0 is no longer seen to be an issue.

I feel that especially with the way student loans come into bank accounts (only a couple of times a semester) that a Monzo student account even without an overdraft could succeed purely for this reason


(James Prince) #38

Tom mentioned that he is interested in finding out the reasoning as to why some customers do not switch their accounts from international banks to Monzo and my personal reason, as I am sure is the same as many student Monzo customers is because we have overdraft facilities that we use at the international banks that offer 0% interest and thus if Monzo was to offer this scheme to students only then I am sure many students would consider switching and making Monzo their current account.

@tom


#39

This gradual year-on-year decrease in interest free overdraft is common to every student account I’ve come across.

It doesn’t make sense for banks to offer the incentive of a student free overdraft to convince students to switch, and hopefully stay for life, and then cripple them with debt which would probably cause them to move accounts as soon as they’ve paid the debt off.


(James Prince) #40

Students should become more financially aware and with a transparent company such as Monzo there is no better place to borrow Money in the future. People know what they are signing up for.

Thank you for you’re comment.