Student Guide – Don’t be daft with your overdraft
An overdraft allows you to draw out/use money that currently isn’t in that your bank account. Usually seen to help those whose cash flow leaves them skint, or for emergency situations. However, most banks offer students an overdraft with their student accounts. In times of student hardship, where 12p baked beans are a staple meal, an overdraft can be very helpful.
At university if you’ve decided to get yourself set up with an overdraft, what do you need to consider, and what are the risks that you need to take into account?
Before the student overdraft
You’re faced by the daunting high street banks, all offer special deals, all want your business, and all try to convince you to take your student account and overdraft with them, but which one should you choose? Martin Lewis has done some of the hard work for you and listed his top student accounts.
A few important factors to think about when choosing what’s best for you:
Think about how much you would want to borrow. Some banks can offer overdrafts of up to £3,000, but do you need that much? If you only plan on borrowing £100 for the occasional food shop (or those spontaneous nights out), there’s not much point in getting a £3,000 limit! Remember, it’s not free money, you will have to pay it back
The amount the bank will charge you for using an overdraft. So ideally, search for the lowest rate as possible, and some banks do offer 0% – but only while you’re a student
Yes, you read that right – not only will banks allow you the cash buffer of an overdraft, but they will also give you incentives to make sure you bank with them. Ranging from free railcards, to food discounts (no more baked beans), many incentive schemes will be available with a student account.
Be careful with your spending
The overdraft and account is in the bag, you’re on your way to university- happy days. Much like lecture attendance, or cleaning your communal kitchen, the overdraft now probably sits towards the end of a long list of priorities in your mind. However, they can have a sting in the tail if you aren’t careful.
Here are a few things to remember, and be wary about:
It’s not free money
Although it may feel like it, it really isn’t that way. Overdrafts are essentially loans, and that means you will have to pay them back. Be careful you don’t use more than you can afford to pay back eventually. Llyods Bank have a useful overdraft calculator to help you explore the true cost of borrowing.
Don’t go over your allowance
Exceeding the overdraft limit in any way can be very costly. For instance, Halifax charges 24.2% interest and a monthly £28 cost anytime you go over (that’s a new pair of jeans!), so be careful and know your limit. Use mobile or online banking to track your finances; you don’t need to go into the branch.
It can be cancelled
In the event that you exceed your overdraft, or do so multiple times as can happen with being a student, a bank can actually cancel the overdraft at any time. Make sure you are sensible with it and try and pay as much of it off whenever possible, as missed payments and cancelled overdrafts can go down on your credit file. A poor credit rating can prevent you from getting finance later on in life, for instance when buying a car or a house.
Watch out when you graduate
When you finish university, apart from probably having to go back to live with your parents again, you will also have to prioritise and monitor your finances. Make sure the bank doesn’t switch your account to a non-student one, and maybe instead ask to move to a graduate one. This will ensure you don’t incur any surprising fees on your overdraft, and give you more time to pay it off. Also remember to try and start paying it off sooner rather than later.
So, now you’re aware of the positives and negatives, you’re ready to enjoy your overdraft smartly!
Ways to boost your income
There are many ways to boost your household income whether you’re in full time employment, working part time, or don’t have a job. Because there’s no magic solution and money doesn’t grow on trees you need a little effort. It will surprise you how many ways you can earn extra cash.
A note: these are specifically some of the better ways to make more money. There are other options if you want to make your money work harder, which can be just as effective.
Take on additional work
Take on extra work to add numbers to your household income column on your budget spreadsheet (you do budget, yes?). The simplest way, if you’re brave enough is to ask for overtime at your main job. But if you’re turned down or don’t feel comfortable asking, there are other options.
Many people take on a second job in the evening or weekends. You could try something different from the day-to-day, no matter how basic. If you’re used to being sat in front of a laptop all day, stacking shelves at night can be a relief.
Alternatively, try freelance work. Various networks are set up and you bid for jobs in a range of disciplines from copy writing and design, to admin and translation. Set up a basic website with examples of your work and you’ll quickly build up a strong freelance portfolio. The potential hourly rates can be excellent. Be careful not to have a conflict of interest with your main job – check your contract at work.
Become a master seller
Everyone has clutter at home. Even those who de-clutter regularly will find a few things that they should’ve got rid of first time round, or have obsolete items that somehow found their way into the home.
It’s surprising how much you can make on selling sites like eBay, Gumtree and Preloved. Fees can take the edge off your earnings but it’s a way to earn money and make your home easier to tidy too – a double win.
Make money on your talents, turn a strength into pounds. Photography websites pay for stock imagery every time a customer downloads it, or set up an online shop to sell craft jewellery or ornaments. If you’re a creative type, reap the benefits.
And if married, you could sell your wedding dress. Some keep it for sentimental reasons, or to try it on again in five years’ time to see if it still fits. But if you’re not bothered you could make a tidy sum selling it on one of the dedicated websites available.
Rent out what you don’t use
You’ve sold your time by taking on extra work, you’ve sold your goods on eBay – now it’s time to sell your space.
Renting out a spare room to a lodger can really help bring in more cash. Depending on where you live you a lodger could pay a significant rent to you. If you don’t mind sharing your home it can be one of the best household income boosts. However there are additional responsibilities, including making sure you’re paying tax on your new ‘job’ as a landlord. Don’t dive into renting out a room without doing the necessary research first.
You don’t need to have a whole spare room to consider renting as an option though – if your storage space like a garage is spare, this can be very valuable to people needing it. Again dedicated websites are available to register your space, and while you’ll lose a cut of the money you won’t need to worry about finding customers yourself.
Also, your parking space can be valuable if you live close to major cities, transport routes or even colleges. Parking comes at a premium, and if you’ve an obsolete garage or driveway you could rent it out weekly. You could advertise locally, or use established websites to advertise it.
With all of these household income boosters, think about the impact on your tax. For help on filling in a self-assessment tax return, visit the HMRC website here.
We’d love to know your own stories about any of the above, or ways that you’ve helped to bring extra cash in to help with your budget – let us know in the comments below.