Student bank bargains discussed
By Mark Brown
From student loans to student accounts is your bank offering you the best possible deal?
Many larger banks in Canada offer packages directed at students, but what is offered in these packages will vary from bank to bank with some deals being better than others.
Students who require financial assistance have the option of approaching either a bank or the government for help. They can apply for Ontario Student Assistance Program, a line of credit or student loans offered by banks.
Many of the larger banks and credit unions have been given the responsibility to handle government sponsored loans as well, said Robert Kerton, financial advisor for the Consumer's Association of Canada.
"The taxpayer gains somewhat because the federal government will no longer be picking up the expense of student loans that are not repaid," Kerton said.
The Royal Bank of Canada offers a line of credit where the student only has to pay interest on the principle amount as long as they are in school, said Lori Galinis, manager of the marketing development program for the bank.
However, it is always a good idea for students to see if they are eligible for a government student loan program first because the government pays the interest, advised Galinis.
The usual credit that we give to a student is $5,000, said Debbie Johnston, a customer service representative for the Bank of Montreal. "The interest rate is usually prime [currently at 5.75 per cent] plus one and in most cases they will need a co-signer."
At the Bank of Nova Scotia, the interest rates are slightly higher ranging from 9.5 per cent with a guarantor to a maximum of 11.5 per cent without a guarantor, said Kim Stevens, a customer service representative.
Prime plus one is currently the rate offered at most of the larger Canadian banks. However, students should be aware of the differences between banks when it comes to paying back loans after graduation.
"Full repayment doesn't start until a year after graduation," Johnston said.
In comparison, Galinis and Stevens said at their respective banks students have to begin repayment of the principle and interest six months after they graduate.
Similarly, OSAP requires students to start repayment of their loans six months after graduation, Galinis added.
"What we see now is that the banks are very keen at attracting students, but are very thorough into checking into students' backgrounds the banks may make unwise loans to international businesses but they don't make unwise loans to students," Kerton said.
In addition to dealing with student loans, almost all banks in Canada have special accounts geared towards students.
Canada Trust offers a student account which entitles the student to 25 transactions per month for a flat rate of $2.95, said Donna Gray, a local branch manager. But if the student exceeds the 25 transactions they will have to pay a minimal charge.
The Canadian Imperial Bank of Commerce also offers a student account slightly different from Canada Trust. "Fees are half price for students and it includes the full range of services offered by the bank," said Heather Whyte, a CIBC spokeswoman.
The Bank of Nova Scotia also offers a student account which entitles a student to 50 per cent off normal bank fees. However, while this discount applies to all transactions through an automated teller, it does not apply to students who wish to pay a bill through an actual teller, Stevens said.