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Graduate Banking

On leaving university, searching for the best graduate bank account may be the last thing on many graduates’ minds. But by taking the time to shop around they could find an account more suited to their circumstances, and possibly even save some money.

With only six mainland UK providers, choice is somewhat limited, however the packages do vary considerably. Graduates will often remain loyal to their student account provider, but with proof of qualification they can possibly change providers up to three years after graduation.

Job prospects and salary expectations provide pleasing reading for this year’s graduates, but this does come at a cost. The latest graduate debts figures in the Barclays 2005 survey showed average graduate debt for the previous year rising 12% to £13.5K. As the table below illustrates, majority of graduate debt lies with the Student Loans Company (SLC), but worryingly banks and credit cards also hold substantial debt for many.

What factors should graduates be looking for?

• Interest free overdraft limit
  The interest free overdraft limits is a key feature, ranging from £1K to up to £3K in the first year. In all cases these limits will reduce over time.
  
  
• Authorised overdraft interest rate
  Subject to credit approval, graduates may maintain their year one limit, but pay interest on the difference between this and their relevant year’s limit. With rates ranging from 9.4% to 17.81%, choosing carefully could see significant savings.
  
  
• Unauthorised overdraft fees and interest rate
  Graduates incomes and expenditures can initially be rather erratic, which may on occasion result in unauthorised borrowing. This can be an expensive, and should be avoided if at all possible.
  
• Incentives
  Unlike the student account market, where incentives are the often the main focus point for providers marketing, only Lloyds TBS and Royal Bank of Scotland offer incentives to graduates.  But don’t be lured in simply based on the incentives on offer, as charges may soon eat away any initial gain. And remember they only have any value if you are actually going to use them!