8. Overdrafts

Student overdrafts have some features that are different to other overdrafts. Most banks offer full-time undergraduate students and some postgraduates special interest-free overdrafts up to a set limit. However, these are usually subject to certain residency requirements and credit checks and, in most cases, banks do not allow a student to open a new account if one already exists with a competitor. Packages vary – eg, students in different academic years may have different overdraft limits.

These special features notwithstanding, strategies where issues arise are usually the same as for other overdrafts.

Note that most banks allow students terms that continue for a period after graduation. The length of time varies between banks and can often be extended by negotiation. This is preferable and you should negotiate this option rather than agreeing to overdrawn accounts being ‘converted’ into graduate loans. Most banks offer preferential graduate terms – eg, lower mortgage rates for limited periods.