Why Open a Graduate Account
Once you graduate, your bank or building society might automatically turn your Student Account into a Graduate Account or Young Person’s Account. If not, consider switching, because this type of current account usually offers preferential terms, to help you pay off student debts and take control of your finances:
- If you have built up an overdraft during your student days, a Graduate Account can help you to start reducing it; most offer an interest-free overdraft for a couple of years or up to a specified amount, with the level of interest-free borrowing gradually decreasing.
But don’t ever go over your agreed overdraft limit, or high interest rates and charges will apply!
- Another reason for changing is eligibility for loans, which you may need in the future.
With most Student Accounts, you can extend your overdraft, but you can’t take out a loan. Graduate Accounts usually offer competitive interest rates on loans and mortgages.
But do think carefully before taking on any commercial loan – they can prove very costly if you can’t keep up with repayments, so should not be an option unless you have a guaranteed steady income (See Debt & Borrowing). Don’t borrow more to pay off existing debt, because that can lead to money problems spiralling out of control; if you are struggling, see Financial Support for where to get help.
- There are always special deals available, because banks are keen to attract new graduates, hoping to secure them as long-term customers (though it’s now far easier to switch banks than it used to be!)
But be sure it will still be the right account for you, once any introductory incentive is finished.
Compare Graduate Accounts
Despite the lack of juicy perks served with a student account, a graduate account is a great tool for anyone with a large overdraft to pay off after leaving university.
Most banks cushion the blow by reducing the free overdraft limit annually, letting you pay what you owe back over two or three years (but note that Halifax only gives you one year). Standard current accounts, by contrast, are not so generous. Most banks will automatically switch you from a student to a graduate account but, if you never needed to use your free student overdraft, then don’t just settle for a graduate account.
Speak to your bank and see if your current account might be a better option. That’s because only two graduate accounts – Santander and Halifax – offer any interest on balances in credit. If you’re about to head off to uni, it’s well worth checking now what happens to your account after graduation. Very few people think that far ahead but, trust me, you’ll be glad you did!
Types of Current Account
The alternative to a Graduate or Young Person’s Account is a normal current account, where you will pay interest on overdrafts, but on the other hand, you could earn a higher rate of interest when your account is in credit. Graduate Accounts are generally only available to you for a few years and you will then have to transfer to a normal current account.
Most current accounts are available as a standard or ‘packaged’ account, which offers extra features – usually for a fee; you pay a monthly charge for benefits such as car breakdown cover and insurance e.g. mobile phone and travel. But don’t pay for extras you don’t really need.
See Choosing a Bank Account to help you decide what will suit your particular circumstances.
Find out more:
Compare Graduate Accounts – check fees, requirements and extras:
Graduate Bank Accounts – Money Saving Expert
Graduate Accounts – Which?
Graduate accounts ranked in order of the maximum free overdraft they allow
Guide to switching from a student to a graduate account – Compare the Market
Links to the major banks offering Graduate accounts:
Royal Bank of Scotland (RBS)
Lloyds Only available to Lloyds Bank Student Account customers