You may think that a student account is a great way to start your university life. But beware of Greeks bearing gifts…
I’m one of those people that would still be in education if I had a choice. Not because I was good at it, but because it meant I didn’t have to work full-time. I ended up at university, partly because I still hadn’t decided what I wanted to do for a career (20 years on, I still haven’t) and partly because nearly everybody from my school did.
I remember quite vividly the summer between my A-Levels and starting university. I was busy getting everything ready, such as making sure that I had enough Pot Noodles and planning my daytime TV schedule. But one of my strongest memories was walking into Lloyds Bank to open my first adult account. Yes, I was finally a man. I could put away my childish things and enter a brave new world. I took my dad with me of course, in case the bank manager was mean to me.
Anyhow, after an hour or so meeting with the manager and being showered with leaflets and a free pen, I walked away with my 1st credit card and a £2000 overdraft. My credit card gave me 6 months interest free on spending, but that wasn’t the best part. My overdraft was 0% interest for 4 years! For somebody who had next to nothing to spend each month, this was awesome. fReE MonEy!!!
This sounded like a win win to me. Unfortunately, although I didn’t know it at the time, I knew nothing about money. Although I had completed possibly (sarcastic tone on) the most useful AS Level in history – General Studies, not once did my school touch on personal finances. I knew nothing about how banks work or the finer details of credit.
The only thing that I knew was that paying 0% interest on anything was good. And my dad warned me off from using my credit card.
My spiralling debt
Needless to say, over the following 3 years, I started to use my credit card. The limit they gave me wasn’t massive, but having a balance close to £1000 every month meant that my interest payments were soon racking up.
In the background, another problem was starting to bubble away. My overdraft was increasing and it soon sat around the £1500 mark. Occasionally it would get perilously close to that £2000 limit where I would need to start paying interest. But because I was earning around £500 per month in my part-time job, I managed to tread water. But who cared if my account showed -£1500 when it wasn’t costing me anything? It’s the bank that ends up out of pocket after all.
When university finished, I increased my hours at work and paid off my credit card. Really, it was the sensible thing to do as the card was costing me money. But, I made no attempt at paying off my overdraft.
And then finally, like a bolt out of the blue, even though I knew it had been coming for the last 4 years… my fee free overdraft ended. That £1500 owed started to cost me money.
The problem was, that I had gotten into the mindset that a £1500 debt was perfectly natural. I could look at my bank statement each month and shrug it off. It had been like that for years, so what’s really changed? As long as I stayed under the £2000 mark, I could suck-up the £30 fees each month.
Adulthood take 2
Soon after, I moved out of my parent’s and moved into a rented house with my girlfriend. With all the bills that came with living in your own place, most of which I had no idea existed, the chances of me paying off the overdraft evaporated.
For the next 10 years, my current account would hit positive figures on payday. Then the following day, when all my direct debits would come out, I would be straight into the red. I dread to think how much I paid in fees, but it must have been in excess of £3000, possibly closer to £4000.
And, I was stuck with Lloyds as I couldn’t switch current accounts whilst having such a large debt. I was missing out on all sorts of perks such as switching bonuses or accounts that paid you for direct debits.
After the birth of our 3 child, I realised what a dire financial position we were in. And when I say we, I do take the blame for it.
This all lead to where I am today and how I entered the world of blogging. I learned many simple ways to cut my bills and discovered some great ways to earn extra in my spare time, not least of all filling out surveys from my sofa!
It was by no means a quick process, but I finally cleared the overdraft within 2 years. I now have a bank account that pays me and made quite a bit of money from switching my current accounts too.
A lesson learned
So, who are the Greeks? In this case it was Lloyds. They pulled me in with a great offer of free money and trapped me for 10 years, earning a lot from me in the process. I always thought that it was me taking advantage of them with their offer, but how wrong was I?
Ultimately, I think we all have to take some personal responsibility when it comes to debts. However, I think student accounts are there to trap you. They encourage you to take on debt, which in-turn, normalizes it for you.
An overdraft is a great tool to have, but should only ever be used as an emergency.
Please, try and avoid getting into the same problems I did.
*Please note, I have nothing against Greek people!