Switching from a student bank account to a graduate bank account

What is a graduate account?

A graduate account is a current account specifically aimed at people who've just graduated from university. Many graduate accounts offer generous overdrafts, often up to three years after you’ve graduated.

If you have an existing student bank account, your bank may automatically switch your student account to a graduate account when you graduate. But that doesn’t mean you have to stick with them.

Thanks to the Current Account Switch Guarantee, switching current accounts is a quick and pain-free process. So it’s worth shopping around to see if you can get a better deal.

How is a graduate account different from a student account?

The main difference is that the overdraft limit on a student account usually either gradually increases or stays the same for the duration of a full-time course.

But with many graduate accounts, the interest-free overdraft limit automatically goes down each year.

The reason for this is that it’s hoped you’ll gradually pay off your overdraft, once you’re working.

So, while a student account allows you to borrow to help get you through your uni years, a graduate account with an interest-free overdraft gives you extra time to pay back what you owe. It’s a good opportunity to start balancing your budget and managing your finances after graduation.

How much the interest-free overdraft limit will decrease can vary among providers, so it’s worth looking around to see what could be right for your circumstances.

Can I open a graduate account with a different bank?

Yes, you don’t have to stick with your current bank when you open a graduate account, especially if you find a better deal elsewhere.

However, some banks reserve their graduate accounts for customers who banked with them as a student.

If you’re thinking about switching to a different bank, it’s a good idea to do your research before you graduate to see what options are available. You could choose to switch student accounts before graduating to take advantage of a graduate account offer that has the overdraft limit and perks you want.

You’ll usually be able to transfer an outstanding overdraft to your new graduate account, then the account with your old bank will be closed.

But bear in mind that you won’t necessarily qualify for the full advertised overdraft amount, depending on how well you’ve handled your money during your uni days.

What happens if my student account has automatically changed to a graduate account?

If you’ve graduated in the past two or three years, you can still switch your graduate account, even if your existing bank has automatically switched your account from a student to a graduate account.

However, if you’ve already graduated your choices for switching are likely to be more limited, as some banks only offer their graduate accounts to students that banked with them.

If you’re thinking of sticking with your current bank, it’s important to ask if and how your overdraft limit will be reduced and when you’ll start being charged interest on the overdraft.

What perks can I get with a graduate account?

The main perk of graduate accounts is having the buffer of an interest-free overdraft while you make a start in your career and (ideally) get your finances in order.

However, some graduate accounts do come with exclusive deals for up to three years after you’ve graduated that can help sweeten the pot.

The perks you get will vary from provider to provider, but can include things like:

• Linked savings accounts

• Cashback on selected purchases

• Vouchers and discounts on dining out and other attractions.

Do I have to open a graduate account?

No, you don’t have to open a graduate bank account once you’ve graduated. If you decide you don’t need the benefits of an overdraft facility, there might be other advantages included in a standard current account that suit your needs better.

Do I need a graduate account?

If you’ve built up an overdraft while studying, then yes, a graduate account could give you a little more breathing space to pay off what you owe without the added interest.

If you don’t need to borrow any money and you’re in credit, you might want to focus more on a graduate account that pays you interest or one that offers useful perks like cashback rewards.

By shopping around, you can compare the different features of each bank account, then choose one that’s best suited to your needs.

How easy is it to switch accounts?

Thanks to the Current Account Switch guarantee, it’s quick and easy to switch bank accounts.

When you open a new account, you’ll need to tell your new bank that you want to switch. Then, in most cases, all you need to do is fill in a Current Account Switch Agreement and an account closure form. Your new bank will handle the rest of it for you, including transferring all your payments in and out.

It takes just seven working days to switch as part of the switch guarantee.

Can I still switch bank accounts if I’m overdrawn?

Yes, you can normally take your overdraft with you when you switch graduate bank accounts, but you’ll still need to pay back the debt.

Just be careful though. If your new bank approves you for an overdraft limit that covers the amount you’re overdrawn, you should be able to transfer your overdraft across. But if not, you might not be able to make the switch. Ask your bank what your options are.

Read our guide on how to pay off your overdraft.

What else should I think about when switching graduate accounts?

There are a few things to think about when switching graduate accounts. Here are our top tips for finding the right deal for you:

• Shop around – when it comes to banking, loyalty rarely pays off. If there’s a better deal out there, go for it.

• If you’re in the red, you might want to consider a bank that offers the longest 0% overdraft period. This gives you more time to pay off what you owe without added interest.

• If you’re good at budgeting and can stay in credit, choose an account that pays a decent interest rate on your balance. You might find you’re better off with a high interest current account, rather than a graduate account.

• Consider what freebies are on offer and if they’ll be useful to you. Just make sure the account works well for you and enticing perks don’t cloud your judgement.

• Remember that some graduate accounts decrease your overdraft limit over time. So make sure you budget enough to clear your debt as quickly as possible.

• Talking of budgets – never go over your overdraft limit. You might have to pay fees for any refused payments and high interest rates on the overdrawn amount. And it can damage your credit rating too. Exceeding your overdraft limit might also mean your 0% interest free period is taken away.

Last, but by no means least, check your credit rating before you apply for a new bank account. Have you noticed that banks usually advertise their overdraft limits 'up to' a certain amount?

That maximum amount is typically reserved for those with the best credit ratings. If your credit history isn’t that great, you might not qualify for a higher overdraft limit.

You can check your credit file for free with the three main credit reference agencies: Experian, Equifax or TransUnion.

In the meantime, try to improve your credit score by paying your bills on time and not maxing out your credit card.