Student overdrafts fill a necessary hole that familial and governmental support just can’t
The idea that overdrafts are either a financial trap or a goldmine is off the mark, and by thinking that an overdraft is a source of free money seems to me a prerequisite for falling into a self-made trap.
Let me first note that this is one of the only times you will find me coming out to bat for the banks, but student overdrafts are unquestionably helpful and necessary. When falling behind on rent, needing to buy course books or simply needing a trip home, an overdraft offers a safety net that can be dipped into when necessity dictates – or in my case, a place to constantly reside.
Some may make the case that overdrafts are too easy to get trapped in, and when that fateful time comes when we all eventually have to graduate, we’ll be stuck paying serious interest because of a past mistake. That position is not necessarily incorrect, but overdrafts are necessary for students, and it only takes a very minimal amount of responsibility in order to make sure you don’t put yourself in a dangerous financial situation. Don’t misunderstand me; I’m aware that some people are in particularly dire straits, and to them this needn’t apply – there are situations where matters are taken out of people’s hands. However, for the average student, there is no real need to be stuck so long as you keep an eye on your income/expenditure.
Like I said, I am no fan of big banks who inarguably prey on the vulnerable, but in this instance they have made life pretty easy. Most run 0% interest on a student overdraft – this means you pay nothing for the money borrowed. They also have graduate accounts which give you an extra year of 0% interest to find employment and work your way out of the debt. Also, many banks will have in-depth conversations about overdraft increases before allowing you to commit to anything. I would say students ought to take responsibility, but there’s really not that much to take; most of that has been taken care of.
I do not claim to be brilliant with money, nor do I confess to being terrible with it either. I would suggest that I’m pretty average: I have a part-time job, I have to pay rent/bills, and, yes, I do rely quite heavily on my overdraft. This does not mean, though, that I am afraid that come next summer when I graduate that I’ll find myself trapped. Banks can – with little to no notice – demand full repayment of money borrowed through an overdraft, though I think the regularity and likelihood of this occurring with regards to a student account is quite low. Overdrafts can fill a necessary hole for many students who aren’t lucky enough to have familial or government support to aid them through university.
Even those who do get stuck in their overdraft had to get one in the first place and, presumably, were thankful to have it at the time. It’s not necessarily overdrafts that are the trap to students – what might be to blame is disgracefully low secure employment, stagnated wages, and an increased cost of living/rent. This is why I do not view overdrafts as a trap: many varying factors come into play when an individual decides whether or not to get one, but they are not there to catch out naive or unfortunate students.
Again, I tread with trepidation as I seemingly move closer to endorsing a free market – something I would never wish to do – but the banks compete for student attention and custom, and in this instance it leads to improved offers that we’ve all probably benefited from. So, in retrospect, after having abandoned my leftist principles, perhaps there is a cost to having an overdraft; I am now evidently bankrupt, but thankfully only morally rather than financially.