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BANKS are targeting students with offers of personal loans, credit cards and interest-free overdrafts with credit up to $6500 – whether or not they have a job.
Words like “interest free”, “unsecured loans” and “no establishment fee” fill brochures used by banks to promote credit to students, a NewsWire investigation has found.
None of the banks’ account documentation list part-time employment as compulsory to get the benefits of a student account.
The banks are offering students free or reduced fees, while personal loan interest rates for students are often at a discounted rate.
Students with reduced credit card fees are offered bonuses like Fly Buy points when they pay by credit card.
A promotion marketed by ASB Bank sends letters to customers saying they have a pre-approved loan waiting at the bank and it can be processed immediately.
The letters offer loans to those who have “missing gaps in your life” such as the need for a “pool table, boat or jet ski”.
A $4000 pre-approved loan in one case was based on the person’s financial status on July 1 – one month after the customer’s full time employment had finished and her income significantly reduced.
The letter asked the customer to call the bank if circumstance had changed, but her call to explain she is now a student and not working full time did not reduce the sum being offered.
In another case, a Wellington student who has been studying for two years now has an overdraft of $2000, with $500 of debt on her credit card.
A Wellington student who asked the Bank of New Zealand if it matters what a personal loan is for was told it is not relevant.
Westpac’s graduate package has a personal loan option for graduates and suggests using the money to buy a car or furniture for a new flat.
All of the banks have a type of graduate account where a student can borrow more.
Some offer staggered lending when the customer has a credit card and an overdraft while studying, then once he or she has graduated the credit entitlement grows and the person can then apply for a personal loan, in some cases for up to $10,000.
Banks do not charge interest on overdrafts while students are studying or for one year after they complete study.
|
BANK |
Personal loans |
Credit card maximums |
Interest free overdraft |
|
ASB |
$4000 (promotional letter). $195 establishment fee. Loan up to $10,000 on completion of study. |
$500 |
$1000 in first year of study. $2000 after completing one year of study |
|
BNZ |
Up to $5000 unsecured – no establishment fee |
$500 |
$1000 first year. $1500 second year. $2000 3rd & subsequent years |
|
Westpac |
On completion of study, up to $10,000 |
$500 (1st year) $1000 (2nd year) |
$1000 first year $2000 subsequent years |