Graduate Banking top tips

Andrew Hagger of Moneynet.co.uk looks at the options facing students as they finish university.
Seeking out the best graduate current account may be the last thing on your mind once you leave university, but finding the right account could save you some serious money when you need it most.

Graduates looking for those all important first steps on their career path will be faced with less choice and far more competition in the jobs market of 2009, so plumping for the biggest interest free overdraft could be a smart move and provide some much needed breathing space.

Graduate top tips

Get to grips with your budget

As soon as you start work, it's important to take some time to work out a monthly budget. This will probably be the first time in your life that you will have had a decent regular income, but at the same time there's a chance that you may have to relocate for your new job and as such have additional travel and/or accommodation expenses to consider.

By drawing up a basic budget spreadsheet on your PC and understanding what's coming in and what's going out, you'll know how exactly how much you have available to start chipping away at your student debt.

Put together a plan for clearing your debts

It's pretty common to finish your studies with a five figure debt to service, but don't break your neck trying to repay it in an unrealistically short timeframe. Obviously you can't ignore the debt, but at the same time you've got to have a life, so reaching a sensible compromise is the objective here.

Don't fret about your student loans

Although these may represent the biggest portion of debt that you've accumulated, they are also amongst the cheapest in terms of interest rate, so concentrate your efforts in repaying your most expensive debts as your first priority.

How much is available on interest free basis?

NatWest, RBS, Abbey and Lloyds TSB will lend you up to £2,000 interest free in year one, however with the graduate additions account from Barclays you can get up to £3,000 free of interest in your first year.

Although you have to stump up a fee of £7 per month (£84 per annum), this is still a good deal when you realise that the additional £1,000 breathing space at say 18% would set you back £180 over 12 months, plus the graduate additions account also comes with breakdown cover and mobile phone insurance.

You don't have to stay with your student bank account provider

Don't feel that you have to remain loyal to your student account provider, as long as you've maintained your account in a satisfactory manner and have written proof of your qualification, there is nothing to stop you switching your custom to a different bank.

The authorised borrowing rate on your overdraft is important too

It's likely that you won't be able to manage all of your borrowing within an interest free overdraft facility, so don't forget to check out the interest rates for authorised graduate overdraft facilities.

With rates ranging from 9.9% to almost 20% - choosing the right deal for your own particular borrowing requirements can save you valuable money on interest charges that you could use towards reducing your debts.

Check out the unauthorised borrowing charges

As a graduate, your income and expenditure can initially be rather erratic; this may on occasion result in you slipping into the red. This can be an expensive, and should be avoided if at all possible. For example you could end up paying 28.7% APR with Abbey, so make sure you don't get stung by keeping a regular check on your balance via the ATM, internet banking or in branch.

Be smart with your use of plastic

Always look to repay your most expensive debt first. Once you have found work, give yourself six months or so (to start to build a decent credit rating) and then apply for a 0% credit card to switch some of your student debt to. The Virgin Money MasterCard is currently offering 0% balance transfers for 16 months, subject to a one off 2.98% transfer fee.