Best graduate bank accounts guide

Best graduate bank accounts

Not all graduates are the same, and will be in very different positions when leaving university. Some will have swanky, well paid jobs sorted, others a low-paid internship, while some plan on just rocking up to new city and hoping for the best. It’s a new and exciting time, but choosing the right graduate account for you is vital to make it work. If you fail to switch to a graduate account, you could be hit with some serious charges.

When you apply for a graduate account, the bank will set you an overdraft limit which is interest-free (which means you don’t have to pay for it), which give you some time without earning money to find a job without paying massive overdraft fees.


Switch banks when you graduate

It’s really important you don’t stay blindly loyal to your bank throughout your life. After your graduate is a great time to look for a new account.

Remember, banks know that even though you’re probably skint now, because of your degree the odds of you earning some serious cash in the future is high. You’re a good investment, so they’ll offer you all sorts of deals to get you to join them.

graduate finance

It doesn’t matter if you’re poor

Sure, the banks are likely to do a credit check and there is a possibility you will be rejected or offered a smaller overdraft than someone else, but remember - the vast majority of recent graduates are in the same boat as you.

If you have an existing overdraft, other debts, or are still looking for employment, that’s when you may have problems.

poor graduate

Graduate doesn’t just mean recent graduate

When it comes to graduate accounts, ‘graduate’ doesn’t always mean recent graduate. It’s possible to get an account if you’ve finished university in the past three years.

You can switch graduate accounts within the first three years after you graduate, if you wanted to take advantage of new joiner offers, but you’re unlikely (it’s not impossible though) to be accepted if you are in your overdraft, so will need to get out of it to switch.

graduate account advice

It’s all about the interest free accounts

Unless you’ve really got it together and have a safe job lined up and have plenty of money, you’re going to need a 0% overdraft.

It’s generally thought that the best graduate accounts are the ones that have a 0% interest rate for the longest time, because if you don’t have an income (or a decent one) you can’t afford the interest. The length of the 0% varies per account, so don’t presume your bank is giving you the best deal.

interest free accounts

Start paying it off

So let’s say you have a three year 0% overdraft. You need to start budgeting your way out of the overdraft or you’re going to have a big lump sum to deal with one day.

Some banks will force you to budget by reducing the amount you can borrow every year (make sure you are prepared for this, or you’ll be paying some eyewatering interest fees) - but if you are not with one of those, you are going to have to use some serious willpower.

pay off debt

Don’t go over your overdraft limit

Going over your overdraft limit is a big mistake but something that happens a lot. Some banks have a small buffer (TSB has a £10 buffer on planned and unplanned overdrafts), but once you go over, there is often a daily charge which is astronomical.

You can go into your bank and ask for help in avoiding this. Some banks will text you as soon as you get close to your limit so you know to stop spending. It’s also worth noting that sometimes it takes a while for money to leave your account (it can take up to three weeks), so leave a buffer so you don’t get caught short.

It’s also worth noting that some banks, sometimes will let you off once, maybe twice a year if you go into branch and apologise/explain yourself. So if you do accidently go over, it’s worth a shot.

overdraft limit

Consider a standard current account

If you don’t need an overdraft after graduating (lucky you!), then don’t get a graduate account as a lot of standard bank accounts have better in-credit interest and introductory offers. Really think about whether you’re going to need an overdraft though, because if you do decide you need one, the overdrafts will be smaller and not free.

To get one of these accounts, you’re going to need an ok credit rating. You can see what your credit rating looks like for free via Experian, Equifax or Noddle. Although they’re free, some sites do charge you once you’ve finished your 30 day trial - so make sure you cancel once you’ve got what you wanted.

graduate accounts

Don’t ignore your bank

If you’ve not paid back your overdraft, keep going over your overdraft or are not financially coping, the worst thing you can do is refuse to open letters and ignore the banks calls. The truth is it’s going to find you and you’re going to have to pay the money back.

It’s FAR better to talk to them and hear all the options available to you, rather than them writing you off and selling your debt to a collection agency and ruining your credit rating forever.

Switch account after you’re no longer technically a ‘graduate’

After the length of your graduate account is up, your account will automatically convert to a normal bank account and it’s not likely to be a good one!

Here’s where banking gets exciting (well… as exciting as it gets), you can switch accounts as many times as you like. And what’s really good about it, is that banks will pay you to do this - you can make some serious cash, such as £100 if you join First Direct (sometimes this is boosted to £125). This is thanks to a new scheme called the Current Account Switch Service which allows you to switch your bank account in seven working days.

bank advice

Below are our top graduate account picks:

Santander

Overdraft amount (interest free) - £2000 (subject to status)

Does the overdraft amount reduce? No, you’ll get the whole £2000 over the three years

Credit check? - Yes

What happens after the 3 years? The account will be moved to an Everyday Current Account, which does charge for an arranged overdraft.

How much is it if you go over your overdraft? Unarranged overdraft fee is £5 per day (capped at 10 days in each monthly statement period). If you try to make a payment while in your unpaid overdraft, you’ll incur £5 per transaction if paid, or £10 per transaction if unpaid. The maximum fee charged each month is £95.

Is the arranged overdraft free? Yes.

Barclays

Overdraft amount (interest/fee free) - UP to £1,500 in the first year (subject to status)

Does the fee free overdraft amount reduce? Yes, the fee-free overdraft reduces from up to £1,500 fee-free in the first year to up to £1,000 fee-free in the second year.

Credit check? Yes

How much is it if you go over your overdraft? Daily fees are charged on the whole balance of an arranged overdraft when the balance is above the fee-free limit (Over £1000, 50p per day, over £2000 £1 per day). If you exceed your agreed overdraft limit by more than £15 you will not incur any further fees unless a transaction is returned unpaid, in this instance you’ll be charged a fee of £8 for each returned transaction (max.1 per day).

Is the arranged overdraft free? Yes, when the balance is within the fee free limit.

Lloyds

Overdraft amount (interest free) - £2000 in first year (subject to status)

Does the overdraft amount reduce? Yes, it will go down to £1,500 in the second year and then £1000 in your third year)

Credit check? Yes

How much is it if you go over your overdraft? You’ll get a £10 buffer (with no fees/interest), but if you go over this you’ll be charged either a £5 or £10 unplanned overdraft daily fee as well as interest.

Is the arranged overdraft free? Yes

TSB

Overdraft amount (interest free) - £2000 in the first year (subject to status)

Does the overdraft amount reduce? Yes, you’ll then get £1,500 in the second year, and £1,000 in the third.

Credit check? Yes

How much is it if you go over your overdraft? You’ll have a £10 buffer on planned and unplanned overdrafts. After that you’ll get a monthly overdraft usage fee of £6.

Is the arranged overdraft free? Yes

Natwest

Overdraft amount (interest free) - £2,000 (subject to status)

Does the overdraft amount reduce? This graduate account lasts only 2 years. In your second year, the interest free overdraft drops to £1000. After that, you’ll be moved to a standard bank account with no interest free overdraft element.

Credit check? Yes

How much is it if you go over your overdraft? You have a £10 buffer, however after that you’ll be charged an unarranged overdraft usage fee of £6 a day (maximum 15 fees per charging cycle).

Is the arranged overdraft free? Yes.

RBS

Overdraft amount (interest free) - £2,000 (subject to status)

Does the overdraft amount reduce? This graduate account lasts only 2 years. In your second year, the interest free overdraft drops to £1000. After that, you’ll be moved to a standard bank account with no interest free overdraft element.

Credit check? Yes

How much is it if you go over your overdraft? You have a £10 buffer, however after that you’ll be charged an unarranged overdraft usage fee of £6 a day (maximum 15 fees per charging cycle).

Is the arranged overdraft free? Yes.

HSBC

Overdraft amount (interest free) - £1,500 (subject to status)

Does the overdraft amount reduce? This graduate account lasts only 2 years. In your second year, the interest free overdraft drops to £1,000.

Credit check? Yes

How much is it if you go over your overdraft? There is a £10 buffer, but after that it’s £5 per day, up to a maximum of £80 per charging period.

Is the arranged overdraft free? Yes

If you're not a graduate yet, make sure you check out our top Student Bank Accounts guide so you get the very best deal.

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