When you graduate, stick with your student bank account and it’ll often leave you overpaying by £100s. Graduate accounts are special bank accounts with preferential terms for those leaving higher education; and some banks offer much better deals for much longer than others. Anyone who’s graduated in the last three years should be switching and grabbing the best.
 Don't be loyal Who counts as a graduate? How to choose BEST BUYS: The top accounts The size of the saving Related Articles/Discuss/Contacts |
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Should I Pay Off My Student Loan?, First Time Mortgages, Gas & Elec, How Interest Rates Work, Problem Debts?, Cheapest Mobile, Food Shopping, Cashback Credit Cards
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Graduate accounts are day-to-day current accounts, which last up to three years, specifically for those finishing higher education. The terms offered are usually a substantial improvement on normal bank accounts; therefore used correctly it effectively means more cash in your pocket.
Rather bizarrely, with graduate accounts, just like student accounts, the much berated big high street banks are massively the winners.
The reason's transparently simple; they're aware if they capture lucrative young customers now, most people are sadly loyal for much of their life. Thus they can cross-sell them often poorly performing mortgages or credit cards, and later shift them in to dismal normal current accounts to rake back their profits.
Therefore while it's important to choose the right graduate account, don't let their short term bribe buy you for life. Grab this cash, then after the special graduate rates end, ditch and switch to the best normal current account (see Best Bank Account article).
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Each bank defines a graduate differently. With HSBC you must have a degree and be working full time or have a job offer, whereas RBS allows anyone who has completed a full-time higher education course lasting at least three years within the previous three. Thus, those with an HND or other non-degree qualifications, should check each bank’s eligibility criteria before joining (See Table For Details).
Don’t switch if you failed your course
The exception to the switching rule is for those who failed to complete or pass a course. While your current bank usually automatically transfers you to a graduate account on the designated course completion date, regardless of pass or fail, a new bank will want proof of graduation.
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Gimmicks and intro bonuses shouldn't form the primary part of your decision as the gain is small compared to the main financials.
- Those who have debts (excluding student loans)
Look for the biggest and longest lasting interest free overdraft. It's the cheapest borrowing possible, and no interest means any spare cash you have can go towards repaying the actual debts.
The reason I exclude student loan debts (i.e. the official loans from the Student Loans Company), is this is very cheap long term debt, and in most cases shouldn’t be shifted or repaid any more quickly than is necessary. So if you only have SLC debts, then for these purposes consider yourself debt free. Read {Should I repay my student loan?} for a more detailed explanation. - Those who are (or nearly are) debt free
Even graduates in-credit should choose the biggest and longest lasting interest free overdraft because, using a technique I call ‘deficit banking', there's money to be made.
Once opened, you want to keep your 0% overdraft at its limit, as it costs you nothing, and put the spare cash this gives you into a high interest, instant access, savings (see Best Instant Access Savings or Cash ISA articles). When you need the cash simply move it back to your current account.
If you’re concerned you may miss the deadline for paying back part of your overdraft then use the Tart Alert to remind you.
The result of this is you're earning interest on money the bank's lent you for nothing and can profit by around £280. However, please don't think this isn't an excuse for spending or borrowing more. If you're not financially disciplined don't try it.
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Two banks are virtually tied when it comes to the top overall graduate account. Lloyds TSB and the Royal Bank of Scotland (RBS) both offer graduates interest-free overdrafts for three years; and have good 0% overdraft limits. The interest free maximums are £2,000 in year one, £1,500 year two and £1,000 year three.
In Lloyds TSB’s case the limits are guaranteed while RBS’ limit is approved on a case-by-case basis. Yet to counter that, if you need to borrow over the limit, and its agreed RBS is cheaper at around 10% compared to Lloyds 16%; plus it also pays higher in-credit interest. Though if you do need more borrowing, in either case it is likely to be cheaper to get a special graduate loan.
As the difference between the two is very fine, it’s simply a case of choosing on which is most convenient for you.
Don’t switch yet if you’ve a Halifax/Bank of
Whilst technically not a graduate account, most existing Halifax/Bank Of Scotland (HBOS) student accounts holders will be given a £2,750 interest free overdraft for the first year of graduation as an extension of their student account.
Therefore if you’re in this situation, stick with the HBOS for this year, then switch to the best graduate account next year. There is always a chance such good limits to switch to won’t be offered next year, but graduate account deals have been consistently improving with most banks, so that’s unlikely.
See Details Of All Graduate Bank Accounts
Yet with both RBS and Lloyds TSB you wouldn't pay any interest at all, thus leaving you £390 better off.
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