GOT A FANCY GRADUATE JOB — OR INTERNING UNPAID? WHATEVER YOUR CIRCUMSTANCES, WE SHOW GRADUATES WHERE TO PARK YOUR PENNIES

If you’re job-hunting, interning or you’ve just started your first graduate job, does it really matter where you park your pennies (or your overdraft)?

In a word — yes! Money experts say that smart graduates who switch to the best graduate bank account for them will dodge hundreds of pounds of interest charges and penalty fees that are coming your way if you don’t (eek!). How? By buying you time to repay your debts without the charges piling up.

The secret is speed. Take action as soon as possible to ensure your cash is in the right place. That way, you’ll avoid being whacked with interest charges and fees now you’re no longer a student.

Think no bank will take you on because you’re so poor? Think again. Banks are oddly relaxed about your current balance — and are unlikely to freak out at the size of your overdraft. They take a long-term view, seeing new and recent graduates as lucrative future customers whose money they’d love to look after.

That means you don’t have to stick with your current bank when upgrading to a graduate account — you can afford to shop around among their competitors to get the best deal.

But we know that’s boring. Which is why we’ve done the hard work for you. This is Graduate Fog’s 100% independent, ultimate review of the best graduate accounts out there…

* ADVICE YOU CAN TRUST!  THIS ARTICLE IS 100% INDEPENDENT EDITORIAL *

Okay, first things first. Many of you will have some basic questions. Like:

“HOW DO GRADUATE BANK ACCOUNTS WORK?” 
Here are the four things you need to know:
1) Most graduate accounts work in similar ways. They give you a set overdraft limit, which is completely interest-free. The idea is that gives you a ‘grace period’ after graduation to pay back what you owe without being hit by overdraft charges.
2) The best graduate bank accounts give you up to three years, but some accounts only give you two years to pay all your overdraft back.
3) During that time, most accounts reduce the interest-free amount for each year after you graduate.
4) Whichever account you choose, you’ll need to set up a repayment plan so you don’t exceed your agreed overdraft limit. Remember, every time you dip into your account beyond this — sometimes called your ‘unauthorised’ or ‘unplanned’ overdraft — you’ll be whacked with even bigger fees. These fees are currently higher than dreaded payday loans – so well worth avoiding.

“SO, I’M TIED IN FOR THE DURATION OF THE ‘GRADUATE’ PERIOD?”
Technically, you’re not locked in for the entire graduate period — you can switch to another graduate account at any time. However, you’ll find that banks won’t let you escape to a new provider if you have a negative (below zero) balance — you’ll have to make sure you’re in credit before you switch. This might be tough if you’re using most of your overdraft in the early years after graduating, so the best plan is to make sure you pick the right account from the outset.

“WHAT HAPPENS AT THE END OF THE ‘GRADUATE’ PERIOD?”
When you come to the end of the graduate account ‘deal’, your bank will convert you to a normal bank account — unless you tell them you’re ditching them for a different bank. That’s right — just as you can switch to a different bank when you move from a student account to a new graduate account, you can switch to a different bank when you move from a graduate account to a regular account. In fact, you can switch bank accounts as often as you like using a scheme called the Current Account Switch Service, which allows you to switch your bank account in just seven working days, and takes care of all your direct debits so you won’t miss paying your bills when you switch. Quite a few banks now paying a switching ‘bonus’ – a big, fat lump of cash to say thank you for joining them. And while they aren’t offered on graduate accounts, the sooner you pay back your debts, the sooner you can switch to a bank that is willing to throw money at you to join them!

“WHAT IF I’M STILL OVERDRAWN AT THE END OF THE ‘GRADUATE’ PERIOD?”
Try to pay off your overdraft before then, if you possibly can. Most normal bank accounts are nowhere near as generous as graduate accounts when it comes to an interest-free overdraft. So, if you still haven’t managed to get rid of that pesky overdraft by the time your grad deal comes to an end, you’re going to start paying interest and fees. There are a few that do give you an interest-free overdraft – First Direct offers £250 interest-free, HSBC charges 0% for the first six months, while M&S Bank (yes, it offers current accounts as well as sarnies and pants) offers £100 interest free. Barclays gives you £200 when you take out a insurance pack and Nationwide gives you three months at 0%. These are the exception, not the rule – most offer a crummy £10 interest-free — or nothing at all. When the time comes, shop around to find the best deal for you.

Well done! Now you understand the basics, you’re ready to discover…
….THE UK’s BEST GRADUATE BANK ACCOUNTS

SANTANDER GRADUATE 123 ACCOUNT
Best for: Graduates who want plenty of time to clear their overdraft and can commit to monthly repayments of £55. And if you pay it back quicker, you’ll be paid interest on anything you leave in your account!

Santander brings a Mediterranean vibe to the banking high-street – it’s a giant in Spain and has been gobbling up millions of new customers in the UK because of its innovative 123 account, which pays you interest – yes, pays you! – on savings you leave in your account. In our esteemed view, this makes the Graduate 123 account stand out from the rest in the market. You get 1% on amounts between £100 and £200; 2% on amounts between £200 and £300; and 3% on anything between £300 and £2,000 – easy as… 123!

How does the interest-free overdraft work?
For three years after you graduate, you get up to £2,000 interest-free.

How can I pay this back?
If you borrowed the maximum £2,000, you’d need to commit to repaying at least £55 a month if you want to rid yourself of your overdraft in the three years Santander gives you. If you want to smash it off in two years, that’s £83 a month. Want to be done with it after just a year? That’s £166 a month you need to fork out.

Anything to watch out for?
This graduate account is pretty straightforward — you simply get three years to pay back your entire overdraft, before Santander start charging any fees. However, if you’re still overdrawn at the end of the three years, you’ll be hit with an overdraft fee of £1 a day. So, going overdrawn for two weeks in a month will set you back £14, making it the most expensive account we’ve looked at. If you’re still overdrawn at the end of the three years, ditch this account and use the seven-day switching service to move to a normal account that charges you far less in overdraft fees.

Any freebies?
Zilch. Just a debit card, online and mobile banking, and you can use the account on Apple and Android Pay. You also get access to a graduate loan.

Interested? Sign up for this account now

BARCLAYS HIGHER EDUCATION ACCOUNT
Best for: Graduates who need a huge interest-free overdraft with a decent amount of time to pay it back — and want to earn some cash back.

Barclays has recently closed its super-generous Additions Graduate account, which gave you five years to pay off your overdraft gradually, and replaced it with the newly revamped Higher Education account. This offers you the highest interest-free overdraft and gives you three years to pay the blighter off – along with some other perks, including cashback of £4 per month straight into your sky-rocket (pocket, for the non-cockneys out there).

How does the interest-free overdraft work?
– First year after you graduate: £3,000 interest-free
– Second year after you graduate: £2,000 interest-free
– Third year after you graduate: £1,000 interest-free

How can I pay this back?
If you borrowed the maximum £3,000, you need to commit to paying at least £84 each month to ensure you stay within the interest-free limits. If you wanted to see the maximum overdraft off in just two years, you’d need to be paying out £125 per month. Want to be debt-free in just 12 months? You’ll need big bucks, as this would require monthly repayments of £250.

Anything to watch out for?
Barclays doesn’t charge annual interest if you exceed the interest-free overdraft – you get hit with daily fees instead. You’ll be charged 50p a day if you’re between £1,000 and £2,000 overdrawn (and you’re in year three of the graduate deal) and £1 per day on amounts above £2,000 (and you’re in year two or three of the deal). That might be a bit easier to work out, but the fees really stack up – 14 days overdrawn could see you being charged between £7 and £14 a month, depending on how indebted and how far along into the deal you are.

Any freebies?
The cashback deal – called ‘Blue Rewards’ is a bit of an odd one – you have to sign up for it and pay £3 a month to get £7 back – which works out to £4 for free. Don’t ask us why Barclays doesn’t just give you £4. You need to have two direct debits set up and pay in at least £800 a month, but think about it this way – Barclays is effectively paying off £48 of your overdraft for you every year. You can also earn cash back on shopping with 180 retailers, along with all the standard online/mobile banking bells and whistles, as well as Apple/Android Pay.

Interested? Sign up for this account now
LLOYDS BANK GRADUATE ACCOUNT
Best for: Graduates who want to make small overdraft repayments for the first couple of years… but love a reward for their spending.

Lloyds Bank is the daddy in the UK and the bank with the majestic black horse emblazoned across it has been providing banking services to Britons since the 18th Century! Its bank account, however, has definitely been created for the modern grad, with a tiered overdraft deal that can help you pay down your debts pronto.

How does the interest-free overdraft work?
– First year after you graduate: £2,000 interest-free
– Second year after you graduate: £1,500 interest-free
– Third year after you graduate: £1,000 interest-free

How can I pay this back?
The good thing about this account is that the interest-free tiers drop gently for the first couple of years of the graduate deal, allowing you to make lower repayments while you might be earning a little less. If you borrowed the maximum £2,000, you need to make monthly repayments of £42 to stay within the interest-free limits for the first two years — then you need to see off the final grand with monthly repayments of £84. Simple!

Anything to watch out for?
Yes – if you don’t manage to get your overdraft down to the interest-free level in time, the fees can stack up. You’ll be currently be hit with 19.89% EAR (the equivalent annual rate — basically the percentage of interest that is added to the amount that you’ve borrowed each year) on anything above the interest-free limit. You’ll also be charged a monthly overdraft fee of £6. So, if you were overdrawn by £1,000 for two weeks in a month, you’d be charged just over £12 in interest. At the end of the third year, switch to a new provider that offers a normal bank account with lower overdraft charges.

Any freebies?
You get the bog-standard online and mobile banking, a debit card and use of Apple/Android Pay. But there is also a nifty scheme called ‘Everyday Offers’, which pays you up to 15% cashback on debit card purchases at certain retailers. And once a month, the bank selects a customer and refunds a large purchase they’ve made (up to £500) on their debit card. It could be you!

Interested? Sign up for this account now

TSB GRADUATE ACCOUNT
Best for: Graduates looking to make slow and steady down-payments on their overdraft, but who think they’ll be ready to get rid of the lot after three years.

TSB and Lloyds Bank were once part of the same family, but now TSB has flown the Lloyds nest and is doing its own thing. Their shared history may explain why the TSB Graduate Account is quite similar to that on offer from Lloyds, but crucially, it’s a wee bit cheaper.

How does the interest-free overdraft work?
– First year after you graduate: £2,000 interest-free
– Second year after you graduate: £1,500 interest-free
– Third year after you graduate: £1,000 interest-free

How can I pay this back?
Similar to the Lloyds Bank account, TSB allows you to gently reduce your borrowings in the early years while you climb the salary ladder. Borrow the maximum £2,000 and you’ll only need to repay £42 a month in the first couple of years, and then double the repayments in the final year to £84 to see it off for good.

Anything to watch out for?
If you exceed the interest-free overdraft limit, you still get hit by a £6 monthly fee but you’ll be charged 16.8% EAR, which is a smidge cheaper than the Lloyds account above. Say you were a grand overdrawn for two weeks in a month, you’d save around £1 compared to Lloyds Bank. We did say a smidge, didn’t we.

Any freebies?
No – the standard debit card, online and mobile banking, as well as access to Apple and Android Pay. Along with Lloyds Bank, you can sign up to something called ‘Save the Change’, which will round up your debit card spending to the nearest pound and bung the difference into a savings account for you.

Interested? Sign up for this account now

NATWEST / ROYAL BANK OF SCOTLAND GRADUATE ACCOUNT

Best for: Graduates who want a chunky interest-free overdraft, but have the capacity to pay it off fairly quickly. Oh, and who love a tempting freebie!

You can’t walk down the high street without seeing a branch of NatWest or Royal Bank of Scotland — more than 1,500 of them are scattered around in the UK. And if you pop through their doors, you’ll be able to get a decent enough graduate account, a fair overdraft repayment deal and a really tasty freebie.

How does the interest-free overdraft work?
If you graduated after 1st January 2013:
– First year after you graduate: £2,000 interest-free
– Second year after you graduate: £1,000 interest-free

How can I pay this back?
Say you’ve borrowed the maximum £2,000. You need to commit to repaying £84 a month back to clear your overdraft in the two interest-free years the account provides. Wanna see it off in just a year? You’ll need to be parting with £167 a month.

Anything to watch out for?
It seems that the bank has jacked up its interest rate since we last looked — you’ll be charged 17.81% EAR. That means being overdrawn by £1,000 for two weeks in a month will cost you £6.31, which is still much cheaper than Lloyds Bank and TSB, as NatWest/RBS don’t charge a monthly overdraft fee. Also, to sign up for NatWest’s graduate account, you need to have been a NatWest/RBS student account customer.

Any freebies?
By heavens, yes! If you sign up to paperless statements and online banking, you get a free Taste card — currently worth £29.99 a year — allowing you to enjoy up discounted meals at thousands of restaurants around the UK.

Interested? Sign up here (with NatWest) or here (with RBS)

…AND ONE GRADUATE BANK ACCOUNT TO AVOID*

(*unless you’re minted)

HSBC GRADUATE BANK ACCOUNT
Best for: High-earning graduates who don’t need to borrow much and want to be rewarded for stashing their spare pennies away.

Now, we’re not saying that HSBC’s graduate account is bad for your financial health, but we think it’s best suited to people who’ve managed to find a decent-paying job and are ready to tuck some money away into a savings account. It doesn’t have the most generous overdraft plan, but does offer you a decent savings rate. This account is great for higher earners who are keen to start stashing some cash once they’ve blasted away their debt.

How does the interest-free overdraft work?
– First year after you graduate: £1,500 interest-free
– Second year after you graduate: £1,000 interest-free

How can I pay this back?
This is another account that allows you to repay less in your first year and stay within the interest-free limits. So, if you borrowed the full £1,500, you’ll need to repay £42 in year one, then double your repayments to £84 in year two to see off the overdraft. If you want to pay your overdraft off in just 12 month, that’s £125 a month you’ll need to find.

Anything to watch out for?
This account has a high interest rate on any overdraft above the interest-free limits – 19.9% EAR. On a £1,000 overdraft for two weeks in a month, that’s £7, putting it in line with NatWest/RBS.

Any freebies?
If you’re earning a decent wedge and want to start putting some money aside, this account gives you access to the Regular Saver account. You can earn 3% AER (annual equivalent rate, or the amount of interest you earn in a year) if you can commit to saving between £25 and £250 a month.

Interested? Sign up for this account here