Graduates can make big savings with the right account

November 1, 2006 By Matthew Paulson

If you’re a recent graduate you may not know it but your custom is something banks value beyond almost everyone else’s. However perilous the state of your student debt ravaged finances may seem you should be encouraged by the fact that at this early stage in your banking life all the major high street banks will be particularly keen to get you on board.

The reason is fairly obvious - banks often see young people who arrange an account stay loyal for a large number of years. Banks can unfortunately rely on the fact that their customers, whether through laziness or apathy, are unlikely to shop around for alternatives. It’s an interesting form of brand loyalty that often means banks can get away with offering non-competitive financial products to existing customers who will none the less buy into them without even considering their options.

The good news is that with the potential of a lifetime of your lucrative custom up for grabs, the major banks are often ready to appeal to young account-holders with student and graduate accounts that offer substantially better terms than an ordinary bank account.

If you’ve just graduated now is a the time to assess your options - don’t fall into the trap of sticking with your current bank for the sake of convenience, there are loads of competitive graduate accounts on the market so you may as you’d be foolish not to look at your options. What you should be looking at before anything else is an account that comes with a high 0% interest overdraft.

The best deals available at the time of writing were offering a £2000 interest free overdraft in the first year (The RBS graduate current account and the Natwest graduate current account both offer £2000 interest free for the first year although the RBS account offers the better long term deal with year two and three at £1500 and £1000 respectively compared to £1000 and £500). If you chose a good graduate account that maintains a decent 0% interest overdraft across the full 3 years (some accounts offer a one year interest-free overdraft only, HSBC doesn’t offer one at all). You could potentially save yourself hundreds of pounds whilst ensuring you have an invaluable buffer and the option to pay off debts.

The one thing to remember however is not to fall into the trap of remaining with the same bank after your graduate account expires. It really is worth the effort of constantly reassessing your situation, comparing your deal with other options (There are a multitude of comparison sites out there, Motley Fool for instance have comparison tables for everything from current accounts to credit cards) and not being afraid to change. By having an inflexible attitude to who you bank with you’re as good as throwing money away.

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