You’ve just come down from the graduation high and it’s now time to start thinking about the practicalities. Like getting a job. Or sorting out your bank account.
The good news is, the latter will be easier than the former. Graduate accounts give you extra time to pay off your overdraft and get acquainted with the idea of being an adult.
What’s a graduate account?
Once you graduate, you soon lose the right to your student bank account. A graduate bank account is a bridge between your student bank account and the standard current account you’ll get once the graduate account has also “expired”.
Most banks automatically switch you to a graduate account once you graduate. Alternatively, you can also apply for one.
Graduate bank account overdrafts
The most important feature of your graduate current account is the 0% overdraft it offers. Since student bank accounts offer generous interest-free overdrafts, students dip into them quite often. However, once uni is over, overdrafts have to be paid back.
Graduate accounts also offer 0% overdrafts for up to three years after you graduate; you should use this time to budget properly and pay back your debt. There are a few things to be aware of:
The limit of your 0% overdraft usually reduces every year. So you should be prepared to repay part of your debt every year.
Your overdraft limit and your 0% overdraft limit may not be the same. For example, you may get up to £2,000 overdraft, but only up to £1,000 0% overdraft. If that’s the case, you’ll be charged fees and interests if you’re overdrawn more than £1,000.
Once your graduate account reverts to a standard current account, being overdrawn will become really expensive. This may happen one, two or three years after graduation, depending on your bank. With standard current accounts, overdrafts are a very expensive way of borrowing money for the long-term, so you should really pay yours off on time.
Can I switch to a graduate account?
If your bank doesn’t offer a very good graduate account, it can be a good idea to switch. That’s possible through the CASS (current account switch service), which guarantees that all your payments and direct debits will be automatically redirected and that your old account will be closed, all within seven days.
However, some graduate accounts are only available to the same bank’s student account holders, so you may be unable to open one. Take that into account when comparing deals.
What if I’ve paid off my overdraft instead?
If you did your budgeting well and haven’t used or have paid off your overdraft, you should reconsider whether you need a graduate account or not.
On one hand, you’ll normally lose the vast majority of the perks and freebies that came with your student account. On the other, a 0% overdraft may still come in handy while you settle down, especially if your first job’s salary isn’t exactly stellar.
If you’re confident you’ll be able to remain in credit, you may want to have a look at high-interest current accounts. There aren’t many around, but they are a great way to boost your balance and start building up some savings.
How to choose your graduate bank account
To sum up, here’s how to secure the best current account deal once you graduate:
Check the terms of the account your bank will offer you. If your bank already offers an excellent graduate account with a good 0% overdraft, you may not have to do anything.
Look around for longer or better 0% overdraft deals. Ideally, you want an account that covers all your debt, for as long as possible. Make a plan for how you’re going to pay it back without incurring any charges.
Check if the account you’re looking at allows switching from another bank. Fingers crossed.
If you don’t need a 0% overdraft (you sure?), consider a standard account. Look for one that comes with rewards or interest paid on your balance.
Finally, banks often don’t advertise graduate accounts very much but they are there, so don’t give up too easily when looking for the right one.
Frequently asked questions
Not necessarily. In most cases, overdraft limits for graduate accounts aren’t guaranteed; the limit you’re ultimately offered will depend on credit checks.
You can, but you’ll have to make sure your new bank agrees to match your existing overdraft. (One way or another, your old one will have to be paid back before the account is closed.) Make sure you’re not getting yourself a worse deal!
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Valentina Cipriani was a writer at Finder UK. She wrote news, features and guides about banking and credit cards, helping people to improve their financial lives. She holds an MA in International Journalism. See full bio
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