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Graduate bank accounts

Find out which graduate bank accounts offer the most generous interest-free overdrafts for 2018.

In this article
What is a graduate account? Top interest-free graduate accounts 2018 Do I need a graduate account? Switch banks when you graduate
Will I get the maximum overdraft? What if I exceed my 0% graduate overdraft? What happens when my graduate deal ends? Graduate loans

What is a graduate account?

Most high street banks offer current accounts specifically tailored to graduates, with generous interest-free overdrafts for up to three years. 

Annual limits vary from £1,000 to £3,000 and tend to reduce each year, to encourage you to start clearing your overdraft. 

You’re eligible to open most graduate accounts for two or three years after finishing your course - when you apply, the bank will ask to see your degree certificate as well as proof of ID and address. 

Top interest-free graduate accounts 2018

Below, we compare 10 graduate accounts, ranked in order of the maximum free overdraft they allow over three years. 

Some banks only offer graduate accounts to existing student account customers - we’ve made a note of these in the table - although most are available to anyone who has completed a full-time higher education course in the UK within the past three years. 

Halifax doesn’t offer a graduate account but does allow its student account customers to keep their account for an extra year after graduating.

Provider

Account

name

undefined

Product

score

Max overdraft

Recommended provider

undefinedSantander

 

More info

No monthly minimum funding requirement but you must credit your account with your primary form of funding e.g. your salary. 

123 Graduate

(for Student

customers only)

75% 78%

Year one £2,000

Year two £2,000

Year three n/a

Recommended provider

undefinedNationwide Building Society

 

More info

Pays 1% interest up to £1,000. At the end of year 1 the overdraft limit falls to £2,500; at the end of year 2 it falls to £1,750; and at the end of year 3 it falls to £1,000 (ongoing). If your course lasted for two years or less you are only eligible for a graduate overdraft of £1,500 in year one, £1,000 in year two and nothing in year three).

FlexGraduate

(for FlexStudent

customers only)

72% 71%

Year one £3,000

Year two £2,500

Year three £1,750

undefinedHSBC Graduate 63% 35%

Year one £1,500

Year two £1,000

Year three n/a

undefinedNatWest

 

More info

Free Tastecard membership.

Graduate 62% 55%

Year one £2,000

Year two £1,000

Year three n/a

undefinedLloyds Bank

Graduate

(for Student

customers only)

62% 40%

Year one £2,000

Year two £1,500

Year three £1,000

undefinedBarclays

 

More info

Apply in branch. Add Blue Rewards (costing £3/month) to earn £7/month cashback when you pay in £800 and maintain two direct debits. Extra cashback available when you buy additional Barclays products.

Mor

Higher Education 58% 53%

Year one £3,000

Year two £2,000

Year three £1,000

undefinedBank of Scotland

Graduate

(for Student

customers only)

57% 40%

Year one £2,000

Year two £1,500

Year three £1,000

undefinedTSB Graduate 55% 40%

Year one £2,010

Year two £1,510

Year three £1,010

undefinedRoyal Bank of Scotland

 

More info

Free Tastecard membership.

Graduate 54% 58%

Year one £2,000

Year two £1,000

Year three n/a

undefinedBank of Ireland

 

More info

£1,500 overdraft if you were in full-time higher education for three years; rising to £2,000 if you studied for four years and £3,000 if you studied for five years. 

Graduate n/a 48%

Year one £1,500

Year two £1,500

Year three n/a

 

Table last updated August 2018. 

Which? Customer Score: Our rating for customer satisfaction is based on feedback from real students. We surveyed 3,379 university students about their student bank accounts between March and April 2018. The score is made up of their overall satisfaction with the brand, and how likely they are to recommend that brand to a friend.

Sample size in brackets: Barclays (359), Bank of Scotland (44), Halifax (90), HSBC (579), Lloyds (239), Nationwide (250), NatWest (258), Royal Bank of Scotland (79), Santander (1,292), TSB (71).

 

Do I need a graduate account?

Even if you start earning money as soon as you graduate, having an interest-free overdraft for a few more years could be an important safety net. 

If you’re convinced you won’t need to borrow any money, you can shift your attention to accounts that pay you interest for being in credit or other perks such as cashback on household bills.

Packaged accounts can also be cost-effective, as long as you use most of the benefits included. Which? assesses the value of insurance included in these accounts every year to rate the best and worst packaged accounts. 

Which? Uni: How to choose the best graduate bank account - quick tips to get the best deal for you

Switch banks when you graduate

If you already have a student account, your bank will automatically convert it to a graduate account once you finish you university or college. 

But there’s no need to stick with the same bank if another one is offering a better deal. 

Even with debts, students are an attractive long-term prospect due to their heavily increased earning potential. 

Can I switch if I’m overdrawn?

Yes, although you’ll need to pay back any overdraft debt. 

This won’t be a problem if your new bank is happy to offer an equivalent overdraft - and you can still use the seven-day switching service to move accounts. But if it won’t match your existing overdraft limit, you may be unable to make the switch. 

Don’t switch until you’ve contacted your bank to see what your options are, as some banks will ask you to repay the full amount within a few days of closing your account. 

Will I get the maximum overdraft?

Not necessarily. Advertised overdraft limits are rarely guaranteed - you’ll spot that most banks describe interest-free overdrafts as being ‘up to’ certain limits - so the amount you’re offered may end up being lower. 

Most student account overdrafts are tiered, slowly increasing each year, so you may not get the maximum until your last year of study. 

As with any form of borrowing, it’s sensible to check your credit score before you apply. We explain how to do this for free here

It's worth knowing that if you've never borrowed money, your score might be lower than you expect, because lenders generally want to see a record of successful repayments. 

Find out more: Credit reports - how to improve your score

What if I exceed my 0% graduate overdraft?

Avoid straying beyond your interest-free limit, or you could face hefty charges. 

If you need to borrow more money, some banks will let you formally arrange for a planned overdraft - you'll generally pay interest (EAR) or daily fees, although TSB charges a usage fee of £6 per month as well as interest at 16.77% EAR. 

Unarranged or unplanned overdrafts can be extremely expensive. Banks have been told to set a monthly maximum charge (MMC) - a cap covering all fees and interest for any unarranged borrowing - but if you're with HSBC, NatWest, RBS and TSB, this is an eye-watering £80. 

Provider

Planned

(EAR)

Unplanned

(EAR)

Monthly cap

(unarranged)

Bank of Ireland

7.76%

21.34%

£80

Bank of Scotland

1p/day per £7 spent

None

n/a

Barclays

More info

Transaction fees of £8 apply for unpaid direct debits, standing orders, or cheques (max four per month and max £8 per day). 

 

Mor

50p/day up to £2,000

£1/day over £2,000

None £32

Halifax

More info

Charges apply to student account which can be held for one extra year after graduating. 

1p/day per £7 spent None n/a

HSBC

19.9%

19.9% plus £5/day

£80

Lloyds Bank

1p/day per £7 spent

None

n/a

Nationwide

None None n/a

NatWest

 

More info

Transaction fees of £8 apply for unpaid direct debits, standing orders, or cheques (max one per charging period). 

More inf y

17.81%

£8/day from £10

£80

RBS

 

More info

Transaction fees of £8 apply for unpaid direct debits, standing orders, or cheques (max one per charging period). 

17.81%

£8/day from £10

£80

Santander

 

More info

Transaction fees of £10 apply for unpaid direct debits, standing orders, or cheques. 

 

None

£5/day 

(after £12 buffer)

£50

TSB 

 

More info

Monthly usage fee (£6) only charged once per month. Daily unarranged fee applied to a maximum of eight days per month. Transaction fees of £10 apply for unpaid direct debits, standing orders, or cheques (max three per day).

16.77% plus
£6 monthly usage fee
(after £10 buffer)

16.77% plus
£6 monthly usage fee
plus £5/day if £10-£25 or £10/day £25+

£80

 

Correct at August 2018.

Table correct at August 2018.

 

What happens when my graduate deal ends?

Your bank will contact you two months before your graduate deal is due to end to let you know that your account will switch to a standard current account. 

This should be one of its fee-free current accounts - for example, Nationwide’s FlexGraduate becomes a FlexDirect account - but make sure you check the terms and charges that will apply. 

Many people stick with the same bank or building society throughout their entire life, but switching takes just seven working days using the Current Account Switching Service

Some banks offer one-off cash bonuses for switching, although don’t let this be the sole reason for choosing that account.

Our table of the best and worst banks reveals how real customers feel about their bank, and Which? Recommended Providers offer great products as well as excellent customer service.

What if I’m still overdrawn when my graduate account ends?

If you’re still in the red once your graduate account draws to a close, after two or three years, you could be stung with interest and fees, which could quickly mount up. 

A handful of banks offer interest-free overdrafts on standard accounts - First Direct is the most generous, offering £250 at 0% - although you should check your credit score before you apply. 

Credit cards with an introductory 0% interest deal on balance on transfers are another option, enabling you to shift your debt and buy some more time to pay it off. 

Find out more: How to deal with debt - where to find free advice

Graduate loans

Previously, several of the big banks offered career development loans of £300 up to £10,000, where the government pays interest on your repayments during the period of study. However, this scheme is ending and applications will close after 25 January 2019. 

A couple of banks offer graduate loans for five years or more, exclusively for existing current or graduate account customers. 

  • HSBC offers graduate loans of minimum £1,000 up to £25,000, repaid at an interest rate of 3.3% APR (max 21.9%). 
  • TSB offers graduate loans of minimum £1,000 up to £10,000, repaid at an interest rate of 3.5% APR (max 30%).

If you're offered the advertised interest rate, this works out as being less expensive than exceeding your overdraft limit. But banks only have to offer this rate to 51% of successful applicants. Everyone else is likely to be offered a higher rate, although HSBC caps interest on graduate loans at 21.9%. 

Always compare the rate you're offered to other personal loans and alternatives such as peer-to-peer

More on Student And Graduate Bank Accounts