A banker responds

Stoozing is not new, Westpac media relations manager Craig Dowling says.

"From the bank's perspective, although the term is new, the practice of stoozing has probably been around as long as there have been people looking to take advantage of interest rate differentials in the market, which is probably about as long as there have been interest rates and people," Mr Dowling said.

"No- or low-interest offers, such as available on student overdrafts up to a certain limit, are often put in place to allow a bank to establish contact with new customers.

"While some take advantage of such offers, for others it is the start of a beautiful and long-lasting relationship - so long as we do our job well - so we think there will continue to be such offers made available."

However, Mr Dowling offered a cautionary note:

"The opportunity for arbitrage - the old term for stoozing - is lower in a low-rate market such as we moved into over the past six months so there should be decreasing propensity to stooz."

Short-term deposit rates with Government guaranteed institutions such as banks were about 3.5%-4% per annum, and there was a definite risk involved in chasing higher returns.

"That needs to be considered, because if a gamble turns bad, the stoozer could find themselves in debt, way beyond their means.

"In the case of a student who stoozes and loses, it could be to the tune of the bank overdraft and if they haven't established a good relationship with one or other bank, they might find zero interest in return.

"Westpac would say it's far better to earn your own money, save it and learn about what Einstein allegedly called the most powerful force in the universe - compounding interest."


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