I was lucky that I had parents who helped me out, I got a job in first year and I went to a Uni where living expenses were “cheaper” but I still dipped in every now and then. Some of my friends were maxed out by the end of semester 1.
Students will enjoy themselves, of course they will and I’m not advocating that students shouldn’t use what is available - however it becomes very predatory when 2/3 years after graduating they may still be in the overdraft and then suddenly the banks turn on the charges.
The big banks do it because they have the capital to burn through and have it offset by their other business (mortgages, loans, business loans, guarantees etc) but for Monzo it just wouldn’t work
Yeah when you put numbers to it it’s very clear how it is not financially viable. So not only is it at odds with Monzo financially but as someone already said it is against their philosophy of conservative lending. Despite the fact that I wouldn’t mind it for myself, I don’t think it’s something people need or expect from Monzo. If a student truly feels they need a large overdraft and they can responsibly use it, then the big banks are still there.
Most banks want to offer you an overdraft when your so student so you max it out and then can then offer you a loan when you leave uni or you spend the next 3 years of your life paying it off pay £20 a month interest.
The best thing to do “in my opinion” is to not take the overdraft and just go full monzo without the temptation.
Just a calm take, not fishing for spicy discussion
There doesn’t really. I’ve merged them to keep things together.
Personally, I think the student overdraft are, at least in part, a mechanism for trapping future customers so I’m not in favour of that as good banking practice. The lack of financial education that seems to exist in parts of the student community (according to my eldest, a student) makes some of them easy prey to this sort of tactic.
I accept that the overdraft also has some utility but with Monzo’s current financial setup I don’t see them being in a position to do this anyway.
And, as has been mentioned already, there’s nothing stopping someone having a legacy account for the overdraft and then transferring money over to Monzo for actually spending it (and getting the associated instant notifications, spending tracking, etc).
Given interest free overdraft seems unlikely given Monzo’s current stage of development I wonder if there are other things Monzo could do to entice students…
To the students out there - what would you rather have from Monzo?
An interest free overdraft with Monzo
Partnerships with Totum/Unidays etc where you would automatically have student discounts/offers applied when you used your Monzo card (not sure if this is feasible, but I would have liked something like this when I was a student instead of remembering to get out my student card for discounts)
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Should there not be an option for ‘none of the above?’
I would suggest if you are going to do this you should offer it as stages for each year of university rather than £3000 in one go. Not a sensible thing to do if that your plan.
I had an interest free student overdraft when I was at uni. It seemed like a sensible idea at the time, I thought I was in control of it. I thought I was good with money.
Then the £2000 limit got maxed out, I left uni, started paying interest on the overdraft, and 10 years later, still in the overdraft, I did a money transfer onto a credit card and started properly paying it off (long 0% period so made more sense than a loan). I was also on a pretty tight budget most of the time i was paying interest on the overdraft, and really could have done without those charges coming out of my small budget.
Students can get advancements on their loan from the university directly and it is taken from their next payment automatically.
This is the best approach in my opinion.
You need to sit down and discuss the reason with someone and they determine if it warrants the lending. It could also highlight poor money management or other issues so they can get support for that too.
Its much safer this way and helps prevent students blowing their money on stupid stuff like I did.
When you say the payment is taken from their next payment, I assume you mean to cover the overdraft that they may have used? However, they are a number of problems with this, as a student you can choose where you want the loan to be paid into, students will just change their bank details with SFE so Monzo won’t be able to take the overdraft back in full. Secondly, if they struggled on the first loan payment then taking part of the second loan installment isnt going to help their financial situation. Thirdly, it doesn’t encourage good budget management skills which students need help with. Maybe offer lessons on how to budget instead? I know many universities offer help with this, but as a bank you should have some ethics on offering overdrafts to students and enable them to build money management skills.
Hi Iona, welcome to the forum. I’ve just highlighted this bit of your reply because it sounds like it should be pointed out that none of the people who have replied for you work for Monzo, they’re all members of the public.
I don’t think you understood what I said so I’ll try to clarify and I hope this helps:
They will give you the money that you need and it is deducted from your next payment before it hits your account. Kind of like, if you got an advance on your salary at work. They’d deduct the amount you owe and then would give you the remainder. This stops you forgetting or getting into more debt because you’ve forgotten to budget for it. All of which is discussed and assessed when you apply.
I’m sure you could negotiate different terms but don’t forget your parents are responsible for supporting you through your further education, and what they can’t provide the government tops this up. All in all, there should be no reason that you’re short but I do understand that people do get a bit giddy with the university lifestyle and unexpected circumstances can arise.
I’m not sure how a overdraft teaches money management skills either? It’s money that is too easily accessible and as others mentioned, because there are no immediate strings attached people rack up debt because it’s a “problem for later”. I’ve fallen victim to this and it is hard when the bank suddenly ask you to repay and dictate insane terms. Banks don’t have the personal touch like universities do, they just ask a computer and that decides what it thinks is best - and as you know it isn’t always correct.
Money management comes from the university body who approves your loan. They can discuss with you why you’re short, assess if it is a continual problem contributed by other factors (too much partying for example) and help appropriately. After all you’re there to focus on your studies so you shouldn’t be stressing about complicated bank repayment terms and interest etc
Anyway, I’ve rambled enough but hopefully this makes it a bit clearer
Overdrafts shouldn’t be offered to students.
There are bigger issues(societal and political) as to why overdrafts have become common in the landscape of education.
Monzo should be looking at those issues and promoting ways to solve them rather than saddling people with sometimes unpayable debt
Agreed 1000 times. The issue is the actual cost of being a student (that is completely disregarding the “going-out” lifestyle).
The actual student loan you receive for “maintenance” for the majority of students doesn’t even cover a years accommodation, let alone food, water, school supplies etc. The system from the start is rigged to make students borrow “interest-free” money, be saddled with that bank and the overdraft for years and then get hit with interest payments because they’ve held it for so long.
