Get to grips with graduate banking and you’ll be better off for up to three years after uni. Ditch the fees and switch to a better deal – here’s how!
From 0% overdrafts to freebie incentives, student bank accounts are pretty good at pulling in the punters.
Graduation doesn’t have to mean the party’s over, though! We’ll show you how to milk the student banking perks by grabbing yourself an account specifically catered for those post-uni.
You can be eligible for a graduate bank account for up to three years after your course ends, so even if you didn’t get around to setting up your grad account fresh out of uni, you could still reduce the costs of any lingering debt by taking those steps at a later date – and switching couldn’t be easier!
7 tips for choosing your graduate bank account
If you were reaping the benefits of a student bank account while studying, it’s likely that your account will automatically transfer into a graduate account with the same bank.
But this isn’t always guaranteed, and is your bank offering the best deal to graduates? Here are some factors to consider when doing your research:
Don’t be loyal to your bank
This might sound like bad advice, but when it comes to banks, loyalty rarely pays!
Staying with the same bank for a long time generally doesn’t come with any perks, as these are normally reserved for new customers who enjoy introductory rates as an incentive for switching.
And thanks to the Current Account Switch Service, switching to the best graduate bank accounts has never been easier. All of your incomings and outgoings will be switched from one bank to another internally, meaning you don’t have to handle any of that stuff (like updating direct debits) yourself.
We would recommend that you regularly review your bank account terms and rates, shop around and switch to a better deal at any time if something better comes up. Switching current account shouldn’t affect your credit rating, so there’s no reason not to do it! Just follow our simple steps on how to switch bank accounts.
Can you switch to a graduate bank account after graduating?
Good question! Unfortunately, however, there’s not a clear yes or no answer. Some accounts can be switched to after graduation, but some can’t (we clarify whether you can for each account in the table below).
If possible, use a bit of foresight and research graduate accounts before you leave uni. That way you’ll have a chance of switching to that bank before graduating, ensuring you get the account you want.
Go for the longest 0% interest overdraft you can find
If you’ve graduated in the red, sourcing the graduate account offering the longest 0% overdraft should be your main aim – but don’t be tempted to rack up more debt than you already have.
While the main aim of your student bank account was to allow you to borrow in order to get through your uni years, the purpose of a graduate account is to give you a few years to pay off what you owe before it starts gaining interest (yep, adult life sucks).
As such, go for the graduate bank account which has the longest 0% overdraft available, as this will give you more time to pay it all back.
Choose an account offering interest on your balance
If you find you tend to be good at budgeting and can stay out of the red, well done!
In this particular case, we’d recommend finding an account with a decent interest rate on a positive balance, which will give you more bang for your buck (this could mean switching to a standard current account, not a graduate one).
Other incentives like cashback on your spending, payouts for switching banks and extra freebies are also always worth looking into (but don’t let one-off freebies cloud your judgement too much).
Check your credit rating before you apply
Before you make your decision on which account to go for, it’s worth taking the time to check your credit rating.
Most of the 0% overdraft facilities you’ll find in graduate accounts will be variable (e.g. “up to £3,000”), so it’s possible that you won’t qualify for the full amount, depending on how your credit score is looking.
Banks will use your banking history (past borrowing, income stream etc.) to decide how large your 0% overdraft limit should be. If your credit rating isn’t great, it’s worth scoping out an account that offers a guaranteed overdraft amount that isn’t based on your rating.
Alternatively, try a few steps to improve your rating.
Budget to clear your overdraft ASAP
Don’t use the interest-free overdraft as an opportunity to spend more money – your graduate account is your last chance to pay back what you already owe before you start gaining interest on it.
While it is possible to set up your graduate account a year after graduation, if you wait around you’ll enter straight into the second year overdraft limit, which is often lower than the first year (as these accounts are calculated from your graduation date).
Graduate account overdrafts decrease on a sliding scale for each year after you graduate, and depending on your account, you could see yours drop by up to £1,000 each year!
Never go over your overdraft limit
If you go over that arranged overdraft limit, you could be looking at daily charges, added interest and additional charges for each transaction (whether the bank honours the payments or not).
It’s expensive and makes your debt even harder to clear, so avoid this as much as you possibly can. Plus, if you consistently mismanage your account, the bank may even reduce or remove some account features (including your overdraft).
Beware of the graduate loan
It’s likely you’ll be offered a bank loan as part of your grad package – but think very carefully before grabbing the cash. Some banks even offer up to £25,000 to graduates, which is a lot of cash (and therefore a lot to pay back!).
Commercial loans work quite differently to Student Finance – for one, you may be expected to start repaying the money almost immediately. Unless you’ve got a guaranteed income, this could be more stress than it’s worth.
If you’re considering a loan because you’re already in over your head with debt, get free advice from StepChange Debt Charity first.
Top graduate 0% overdraft accounts
Here’s our pick of what’s on offer to graduates right now, but remember to always read the small print for yourself.
Also note that some banks, such as Santander and Co-op, have recently removed their graduate accounts from their product ranges. Our table only includes graduate accounts that are available to open (either to continuing customers or those switching) as of July 2019.