Banking By Degrees

Sydney Morning Herald

Wednesday March 12, 2003

Anne Lampe

If you have a child who began tertiary study this year, chances are a leading bank has offered your child a credit card, a bank account and a personal loan.

Banks see students as promising opportunities for building lasting banking relationships. After all, most students need money while studying for what could be five or six years and the students expect after all the hard work to be in the running for a well-paid job with good prospects.

Played the right way, a good banking relationship will, therefore, lead to a home loan, more bank accounts - this time with fees - bigger credit card limits, perhaps a super account and a demand for financial advice or funds management services.

Some parents are concerned that the offers might rope their kids into debt, credit card limits that are too tempting or situations that require a parent to go guarantor for a credit card or a personal loan. It seems there is no need to be alarmed.

A spokesman for the Australian Bankers Association says students under 18 cannot be offered a credit card or personal loan.

They can only operate a credit card if it is a parent's supplementary card, in which case the principal cardholder is liable for the debt incurred, and personal loans are out.

At 18, students are adults and can enter into a banking relationship. Personal loan limits vary greatly but are tailored to earning capacity.

Often they involve deferred repayment terms with greatly reduced application fees or none at all. The banks expect to recover those fees many times over when the student moves into the career-climbing stage. The loans are usually used to buy computers, cars or other study equipment.

For credit cards, annual fees can be waived altogether - as is the case with the Commonwealth Bank (CBA) - or greatly reduced.

Often they come with a healthy interest-free period, provided that the amount outstanding is repaid at the end of the month.

The most visible package for tertiary students is offered by the CBA as the student options package, also called Zero. That stands for zero account-keeping fees, zero personal loan application fees and zero annual credit card fees.

A CBA spokesman said that the bank offers its package on university campuses during orientation week and on open days when the bank could talk to students about banking and finance issues.

Applicants have to show evidence of some sort of income stream, whether from a job, a family trust or company, or from dividends.

Alternatively, they have to show that parents are paying the student some sort of regular allowance.

Applicants must also satisfy the 100-point requirement. Credit card limits vary with income but average about $1500. School leavers are not targeted for this marketing campaign.

Westpac has a similar package, offering its Classic account free (usually costing regular customers $5 a month) provided transactions are done at Westpac or Challenge Bank ATMs or banking is conducted via phone or internet. It also offers a MasterCard with a 55-day interest-free period on credit card purchases and a $24 annual fee that will rise to $30 at the end of this month.

It also offers student loans for between $3000 and $10,000 with an annual interest rate of 11.45 per cent and deferred repayments for up to 30 months, or a fixed personal loan with an upper limit of $30,000.

© 2003 Sydney Morning Herald

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