What to Do When Picking a Graduate Bank Account

Once you graduate, your bank or building society may automatically change your student account into a graduate bank account. But, as Tom from Save the Student explains, it is wise to assess your banking options at this stage.
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After three years of slumming it as a student, it’s easy to get excited about the prospect of earning some proper money as a graduate. But your first pay cheque may be a little further off than you think. And even once it arrives, you might not be able to live the high life you’ve been waiting for. Your starting salary is likely to be on the more modest end of the scale, and you might have some non-Student Loan debt to pay off – whether that’s your overdraft, credit cards or whatever else.
With that in mind, it’s important to make sure you have a bank account that works for you. Student bank accounts tend to automatically transition into a graduate account once you leave uni, but there’s definitely merit in assessing your options, and making a switch if you need to. So here are four things you need to do when choosing a graduate bank account:

1. Avoid getting swayed by bank account perks

When you signed up for a student bank account, you may have got some kind of reward for doing so. This could have been a free Railcard, a tastecard, or even cash. Sometimes, a graduate bank account will retain the freebie and renew it for a year or two. Or the bank may offer a new incentive, like cashback on your spending to let you make money as you shop. As tempting as these perks may be, making your decision solely based on them is not always wise. Depending on your financial situation, there may be more important things to consider…

2. Look at the overdraft allowance

As you know, the overdraft on your student bank account comes with a 0% interest rate, meaning there’s no fee for utilising this money. It’s one of the safest and most accessible forms of extra cash at a time when you may desperately need it. And as we have already mentioned, you might have some extra debts you will need to clear before you start living your best life – most likely including your student overdraft.

Fortunately, your access to a 0% overdraft doesn’t abruptly end on the day you graduate. Your student bank account should become a graduate account, which also includes an interest-free buffer. But unlike before, with a graduate bank account your interest-free overdraft allowance will now shrink year-on-year. Make sure the maximum amount on offer is enough to get you through, and that you won’t suddenly be paying interest on the debt you accumulated at uni.

3. Check the interest-free period 

Once you graduate, your interest-free overdraft will only last for a finite amount of time. Thankfully, this tends to be years rather than months – but not all accounts offer the same privileges. Some graduate accounts will give you three more years of interest-free overdraft, while others will start charging fees after just one year. If you think you’ll need a little time to get into the black, go for an account that offers a longer interest-free period.

And remember that if you have other non-Student Loan debt that is charging interest, repay that first, starting with the highest interest debt (e.g., credit cards). The beauty of the interest-free overdraft is that it allows you to focus on other repayments for a little while, without penalising you for doing so.

4. Want to switch? Do it soon

If, after you have done your research, you decide that you want to switch to an account that’s better suited to your needs, do it ASAP. Some graduate accounts won’t accept newcomers who have already left uni, so you’ll need to make the switch to their graduate account before you graduate.

Already donned your robes and received your degree? Don’t panic. Some banks will still allow you to switch as a graduate, so there is a chance that your preferred bank account will still be a viable option.

Of course, if it turns out that your current bank account offers everything you need, that’s fine too! But the important thing is to do your research and make an informed decision, whatever that ends up being.


About the Author

Tom Allingham is Head of Communications at Save the Student, the UK’s #1 student money website. He graduated from Queen Mary, University of London in 2015 with a degree in English Language and Linguistics.


Find out more:

Graduate Bank Accounts
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Top Money Tips for New Graduates
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