Introduction to Open Money Club's guide to Banking for Graduates

Just graduated? Or are you close to finishing your studies? We know that you probably have a lot of admin to deal with right now on top of the whole issue of getting a job and deciding where to live after Uni. Figuring out a graduate bank account might sound like hassle, but it could be super helpful in bringing you extra financial flex and security. But, alas, do not fear! We are here to help. Let's help you get one thing ticked off your list and find a graduate bank account that can help you manage your finances in this tricky transition period of your life.

So far, you've probably had things pretty easy with your bank. Under 18s don't get slammed with onerous fees and student bank accounts come with interest-free overdrafts, often shield you from too many fees and come bundled with a bunch of extra perks. But now you’ve graduated it’s more important than ever to get to grips with the basics of banking. Over the next few years, you’ll probably start to be charged for any credit you use from arranged overdrafts to credit cards or graduate loans and may be caught out with fees and charges. Luckily, many graduate bank accounts are designed to help you transition somewhat. Use the table below to compare the best graduate bank accounts and see what services are out there designed for graduates.

In our guide to graduate banking we aim to give you the tools you need to compare the best graduate accounts, let you know our favourites and give you a few explainers. You might also be interested in our guide to student banking or our guide to personal banking.

3 things you should probably consider

1

Graduate Overdrafts. Interest free overdrafts are a key feature of student bank accounts, and this is generally continued into graduate bank accounts. Typically, graduate bank accounts will offer between £1,000 and £3,000 completely interest-free, for at least the first year after you graduate, which will taper down over the year or two after that. You may also have the option to have a higher arranged overdraft limit, which you can pay standard interest on. Check out our overdraft explainer for more info.

2

Credit - Graduate Loans & Graduate Credit Cards. It can be a tough time for your finances after you graduate finish Uni. You might be laden with student debt, have maxed out your overdraft and now need to feed yourself until you find a job. Even once you have a job, there’s probably a bunch of stuff, like suits / hoodies, that you have to buy. To provide some extra help, many graduate bank accounts will offer credit cards and some will offer graduate loans to help you transition. However, we'd always recommend having a good budget and sticking to it before going into any more debt. But you know that already. Check out our credit cards explainer or our graduate loans explainer for more info.

3

Interest Earned on Savings. So while most cash-strapped graduates will be taking advantage of interest-free overdrafts, perhaps you actually expect your graduate bank account to be in the black for the foreseeable future. Well done you! In that case, you may want to look at graduate bank accounts which offer the best rates on you bank balance. Check out our interest rates explainer for more info.

Our Picks

Santander 123 Graduate Current Account

Santander offers a great all-round account. The interest-free overdraft limit of £2,000 offered is extended for three years after you graduate. The account also pays interest on balances of 3% between £300 and £2,000.

TSB Graduate Bank Account

TSB’s account is well suited to those who need some extra flex in their finances. Interest-free overdrafts are offered for three years (£2,000 in Year 1 down to £1,000 in Year 3) and you may also be able to access a credit card and a graduate loan.

Barclays Higher Education Account

Barclays offers a high potential interest-free overdraft, with a £3,000 limit in your first year after graduating down to £1,000 in the third year. Remember though, this is a theoretical limit and will be decided case by case.

Compare the short list of graduate bank accounts

Santander 123 Graduate Current Account

Free
Overdraft
1 Year:

£2,000

Overdraft
Interest
Rate:

--

Interest
Earned on
Savings:

3.0%

Graduate
Loan
Available?

Santander 123 Graduate Current Account offers an interest free overdraft with a limit of £2,000 that will remain in place for three year after you graduate. Also offers 3% interest on balances between £300 and £2,000. Beware: you will be charged a daily fee on unarranged overdrafts.

TSB Graduate Bank Account

Free
Overdraft
1 Year:

£2,000

Overdraft
Interest
Rate:

16.77%

Interest
Earned on
Savings:

--

Graduate
Loan
Available?

TSB Graduate Bank Account offers an interest-free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,500 in your second year and £1,000 in your third. Also offers a credit card, arranged overdrafts beyond the interest free limit for 16.77% EAR and a graduate loan facility. Beware: you will be charged a daily fee on unarranged overdrafts.

Barclays Higher Education Bank Account

Free
Overdraft
1 Year:

£3,000

Overdraft
Interest
Rate:

--

Interest
Earned on
Savings:

--

Graduate
Loan
Available?

Barclays Higher Education Bank Account offers an interest free overdraft with a limit of £3,000 that will remain in place for the first year after you graduate, down to £2,000 in your second year and £1,000 in your third. Also offers cashback rewards. Beware: you will be charged a daily fee on unarranged overdrafts.

HSBC Graduate Bank Account

Free
Overdraft
1 Year:

£1,500

Overdraft
Interest
Rate:

19.9%

Interest
Earned on
Savings:

3.0%

Graduate
Loan
Available?

HSBC Graduate Bank Account offers an interest free overdraft with a limit of £1,500 that will remain in place for the first year after you graduate, down to £1,000 in your second year. Also offers arranged overdrafts beyond the interest free limit for 19.9% EAR, a graduate loan facility and access to a 3% AER regular savings account. Beware: you will be charged a daily fee on unarranged overdrafts.

NatWest Graduate Bank Account

Free
Overdraft
1 Year:

£2,000

Overdraft
Interest
Rate:

17.81%

Interest
Earned on
Savings:

--

Graduate
Loan
Available?

Natwest Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate and will reduce down to £1,000 in your second year after graduation. Also offers a free tastecard membership and arranged overdrafts beyond the interest free limit for 17.81% EAR. Beware: you will be charged daily fee on unarranged overdrafts.

RBS Graduate Bank Account

Free
Overdraft
1 Year:

£2,000

Overdraft
Interest
Rate:

--

Interest
Earned on
Savings:

--

Graduate
Loan
Available?

RBS Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,000 in your second year. Also offers a free tastecard membership. Beware: you will be charged daily fee on unarranged overdrafts.

Lloyds Graduate Bank Account

Free
Overdraft
1 Year:

£2,000

Overdraft
Interest
Rate:

68.4%

Interest
Earned on
Savings:

--

Graduate
Loan
Available?

Lloyds Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,500 in your second year and £1,000 in your third. Also offers a credit card, arranged overdrafts beyond the interest free limit for 68.4% EAR and a graduate loan facility. Beware: you will be charged a daily fee on unarranged overdrafts.

Halifax Student Current Account

Free
Overdraft
1 Year:

£1,500

Overdraft
Interest
Rate:

68.4%

Interest
Earned on
Savings:

0.1%

Graduate
Loan
Available?

Halifax Student Current Account offers a potential overdraft limit of £1,500 while you study. Interest free overdraft will remain in place for the first year after you graduate. Also offers 0.1% AER on bank balances and some cashback extras. Beware: you will be charged a monthly fee and interest on unarranged overdrafts.

Our summary table in a non-exhaustive list of just some of the major products out there. We’ve tried to keep the column headers to a minimum, while providing you with the information we think you will care about the most. Before opening any bank account, you should be sure that you do a full review of the product on its website and thoroughly read the terms and conditions. None of the information in this table is designed to provide advice, but only to empower you to help make your own decision. If you have any suggestions on how we can improve our table, please drop us a mail.

Santander 123 Graduate Current Account


Santander 123 Graduate Current Account offers an interest free overdraft with a limit of £2,000 that will remain in place for three year after you graduate. Also offers 3% interest on balances between £300 and £2,000. Beware: you will be charged a daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £2,000
Overdraft Interest Rate: --
Interest Earned on Savings: 3.0%
Graduare Loan Available?


Apply


TSB Graduate Bank Account


TSB Graduate Bank Account offers an interest-free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,500 in your second year and £1,000 in your third. Also offers a credit card, arranged overdrafts beyond the interest free limit for 16.77% EAR and a graduate loan facility. Beware: you will be charged a daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £2,000
Overdraft Interest Rate: 16.77%
Interest Earned on Savings: --
Graduare Loan Available?


Apply


Barclays Higher Education Bank Account


Barclays Higher Education Bank Account offers an interest free overdraft with a limit of £3,000 that will remain in place for the first year after you graduate, down to £2,000 in your second year and £1,000 in your third. Also offers cashback rewards. Beware: you will be charged a daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £3,000
Overdraft Interest Rate: --
Interest Earned on Savings: --
Graduare Loan Available?


Apply


HSBC Graduate Bank Account


HSBC Graduate Bank Account offers an interest free overdraft with a limit of £1,500 that will remain in place for the first year after you graduate, down to £1,000 in your second year. Also offers arranged overdrafts beyond the interest free limit for 19.9% EAR, a graduate loan facility and access to a 3% AER regular savings account. Beware: you will be charged a daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £1,500
Overdraft Interest Rate: 19.9%
Interest Earned on Savings: 3.0%
Graduare Loan Available?


Apply


NatWest Graduate Bank Account


Natwest Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate and will reduce down to £1,000 in your second year after graduation. Also offers a free tastecard membership and arranged overdrafts beyond the interest free limit for 17.81% EAR. Beware: you will be charged daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £2,000
Overdraft Interest Rate: 17.81%
Interest Earned on Savings: --
Graduare Loan Available?


Apply


RBS Graduate Bank Account


RBS Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,000 in your second year. Also offers a free tastecard membership. Beware: you will be charged daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £2,000
Overdraft Interest Rate: --
Interest Earned on Savings: --
Graduare Loan Available?


Apply


Lloyds Graduate Bank Account


Lloyds Graduate Bank Account offers an interest free overdraft with a limit of £2,000 that will remain in place for the first year after you graduate, down to £1,500 in your second year and £1,000 in your third. Also offers a credit card, arranged overdrafts beyond the interest free limit for 68.4% EAR and a graduate loan facility. Beware: you will be charged a daily fee on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £2,000
Overdraft Interest Rate: 68.4%
Interest Earned on Savings: --
Graduare Loan Available?


Apply


Halifax Student Current Account


Halifax Student Current Account offers a potential overdraft limit of £1,500 while you study. Interest free overdraft will remain in place for the first year after you graduate. Also offers 0.1% AER on bank balances and some cashback extras. Beware: you will be charged a monthly fee and interest on unarranged overdrafts.


Interest-Free Overdraft in Year 1: £1,500
Overdraft Interest Rate: 68.4%
Interest Earned on Savings: 0.1%
Graduare Loan Available?


Apply


Explainers for Graduate Bank Accounts

Graduate Bank Accounts

I have a student bank account and i've now graduated… what should I do?
If you already have a student bank account, generally your bank will automatically convert you to their graduate bank account if they have one. You should check your account’s terms and conditions or speak to a bank representative to ensure you fully understand what’s happening.

Remember, you shouldn’t just default for sticking with your current bank account, as the right bank for you as a student may not necessarily be the best option for you now that you're a graduate. Switching accounts is easier than most people think, so at each significant point in your life, it’s good to review all of your options afresh.

What exactly is a graduate bank account?
A graduate bank account is just like any other bank account you will have at any other point in your life - you’ll get a debit card and will likely have the usual online or telephone banking options as well as touch payments, Apple Pay and any other payment options currently in trend. Graduate bank accounts are usually free of monthly charges and you will be able to withdraw from most ATMs for free.

What makes graduate bank accounts different?
Graduate bank accounts, predictably, sit somewhere between student bank accounts and everyday personal bank accounts. One unique feature of a student bank account is that you are offered access to student overdraft facilities completely interest-free. A graduate bank account will typically allow you to keep this interest-free overdraft for a certain amount of time, but will taper off over a period of one to three years. You will then begin to pay standard interest rates on the portion of your overdraft that is beyond the interest-free limit.

Other features of a graduate account can include access to graduate loans, which generally have fairly reasonable interest rates and offer graduates that extra bit of flex they may need.

Who can open a graduate bank account?
Most graduate bank accounts are available to anyone who is aged 18 and over and has recently completed a further education course which is at least a two-year course.

Can I have more than one graduate bank account?
Banks generally will require this account to be your main account and sometimes will specify minimum amounts that you will need to deposit into the account. This will also be a factor on whether you can retain and increase your overdraft limit.

Will my graduate bank account cost me anything?
Not usually, no, it won’t cost you to open a graduate bank account. All of the accounts on this page are free to the consumer.



Student Bank Accounts on Graduation

What banks do with your student bank accounts after you have completed your studies differs, so you should be sure you fully understand what’s going to happen.

What happens to my student bank account when I graduate?
Usually, your bank will automatically convert your student bank account to a graduate account when you graduate. Some banks will give you an extra year of interest free joy, while others will taper off over a few years.

What should I do when I graduate?
Check the terms and conditions, or speak to a bank representative to make sure you are absolutely clear what is happening with your account. In any case, when you graduate you should be reviewing your account and check for the best deals out there again.



Graduate Overdrafts

A unique feature of student bank accounts are interest-free overdrafts, and these will often extend for one to three years after you graduate. So what is a graduate overdraft, how do they work and why should you care?

What is a graduate overdraft?
An overdraft is where you spend more money from your bank account than you actually have. This means that you are effectively borrowing money from your bank and your bank balance will be in negative numbers or ‘in the red’.

An arranged overdrafts is where you have previously agreed to an ‘overdraft limit’ with your bank and you will have to pay a certain amount of interest on how much of the overdraft you use. Student and graduate bank accounts are fairly unique in that banks offer fairly large interest-free overdrafts, which means you can benefit from an arranged overdraft, typically between £1,000 and £3,000, for free, for between a year and three years after you graduate.

Beware unarranged overdrafts...
Unarranged overdrafts are pretty self explanatory. This is where you withdraw more money from your graduate bank account than you have and more than the overdraft limit you have agreed with your bank. Many student bank accounts will simply cut you off before you withdraw too much, but once you graduate it is much more typical that you will be slapped with high interest rates and fines. It’s important you check this with your bank, but it’s best to just discipline yourself to not withdraw more than your arranged overdraft.

Remember, most graduate overdraft limits advertised are not guaranteed
To most student and graduates, overdrafts are a valuable source of cash and flexibility to help them through their studies. It might be tempting to just go for the account with the highest potential overdraft limit, but it’s important to remember that these headline figures are subject to your personal circumstances and may be decided on a case-by-case basis

Which graduate bank accounts offer the best graduate overdrafts?
Different banks have different approaches to their interest-free overdrafts that they offer with their graduate accounts. Some will offer an extension on an interest-free overdraft limit for only the first year after your studies, but others will extend for three years after graduation:

  • Santander offer the highest potential interest free overdraft limit for the longest time after graduation, with a £2,000 limit for three years.
  • TSB, Barclays and Lloyds also offer interest free overdrafts for three years after graduation.
  • Natwest, HSBC and RBS will allow interest free limits for two years after graduation.
  • Halifax do not offer special graduate accounts. Instead, your interest free overdraft limit will remain in place from your student account for the first year after graduation.



Graduate Credit Cards

In addition to interest-free overdrafts, some graduate bank accounts also offer credit cards (typically with a limit of around £500).

Should I get a graduate credit card?
Of course, you’re probably better off just sticking to your interest-free graduate overdraft, as using credit cards can result in you being charged interest. However, credit cards may be useful if you are looking for a little bit of cash flow flexibility.

How should I think about graduate credit cards?
If you pay off the full balance on your credit card each time your bill is due, you will be able to avoid paying interest. This can be useful if you need a little bit of cash flow flexibility to get you through a short period of time.

Other options for your credit card are paying off the “minimum amount”, which means you will be charged interest on the rest. Since you will probably have an interest-free overdraft, this should always be your first port of call.

What graduate bank accounts offer credit cards?
If credit cards are important to you then graduate bank accounts with NatWest, RBS, Bank of Scotland and TSB offer them.



Graduate Loans

What is a graduate loan?
Some graduate bank accounts offer loans to help graduates transition from University to the real world. Typically, these graduate loans will be offered with manageable payments and reasonable interest rates.

That being said, you should always think very carefully before taking out more debt. It is worth talking through your options with a bank representative.



Charges and Fees on Graduate Bank Accounts

Should I care about interest rates charged?
For most bank accounts, it’s really important that you know exactly what interest rates you will be charged for things like overdrafts. If you’ve had a student bank account, you have probably not been paying a lot of attention to what interest rates banks charge, as you will have been making use of interest free limits.

Well, you’ll still be able to make use of interest free limits in your graduate bank account, but it’s time to start learning about rates, as it’s likely that you’ll be charged them at some point soon.

How much will I be charged for arranged overdrafts?
At the moment, banks will typically charge you a certain interest rate for arranged overdrafts beyond your interest-free limit. You will sometimes also be charged a small monthly flat rate fee (between £5 and £10) to access arranged overdrafts.

What about interest rates on unarranged overdrafts?
While you may have a large interest-free overdraft limit, you may accidentally withdraw more than your arranged limit. Of course, your default position should be that you don’t go over your agreed limit and can live blissfully unaware of what rates your bank would charge otherwise, but it’s probably worth figuring out what you will be charged just in case.

If you check your accounts terms and conditions, they will let you know exactly what these charges will be. Sometime banks charge a flat fee of say £5 per day, and others will charge a flat interest rate of say 20%. Some will charge a combination of an interest rate and a fee.



Interest Earned on Savings

If you are a graduate who plans to be in credit within your graduate bank account, as opposed to overdrawn, firstly, well done you, and secondly, you should check which accounts offer the best rates.

What is AER?
Interest rates are often quoted in AER, which stands for Annual Equivalent Rate. AER is designed to make comparing interest rates easier. The calculation assumes that you keep earning interest over a year and takes into account factors such as compound interest. The bottom line is, when you want to compare interest rates, look for the AER number to ensure you are comparing apples to apples.

Which graduate bank accounts offer the best interest rates?
The graduate bank accounts on this page do not offer much in terms of in credit balance interest. If this is something you are looking for, Santander and HSBC offer 3% on savings.

Having said that, if you don’t plan on benefitting from interest-free overdrafts, you may be better off putting your savings elsewhere.

What are my other options for earning interest?
It’s important to remember, if you don’t plan on benefitting from interest-free overdrafts on a graduate bank account, your banking options expand a little. Depending on how high a balance you expect to have in your account, it may be worth just getting a personal current account, or even looking at more formal savings options like ISAs. Perhaps start by checking out our guide to personal banking or our guide to saving and investing if you expect to have significant savings.



Post-grad Student Bank Accounts

What if i’m a postgraduate student?
Student bank accounts will generally extend to postgraduate students too and some will even allow a higher interest free overdraft limit in subsequent years of study. If you are a post-grad student you should check your account’s terms and conditions, or speak with a bank representative to ensure you know exactly what’s going on. Perhaps start by checking out our guide to student banking.



Switching to a Graduate Bank Account

It is likely that you already have a bank account in some form. What should you do?

Should I just pick the bank I already have a student bank account with?
Just because a certain bank was right for you while you were a student, it doesn’t mean that that bank is right for you now that you’re a graduate.

We would always recommend that when your financial and life circumstances change, it is a good idea to re-acquaint yourself with what’s on offer out there in banks. It’s a good time to review everything on offer from a fresh perspective.

Don’t be scared of switching. Banks want you to switch and so make it as easy as they can for you. Usually, you’ll just have to give them your details and they’ll go ahead and shut down your old student account and set up your new graduate account and transfer over things like your direct debits. The whole process takes around a week and won’t take much effort on your part.