Emma Roberts reveals how graduates can successfully deal with their post-university finances.
Just as you think you’ve finally got the art of budgeting sussed, your university bubble lifestyle is abruptly popped and you’re thrown cruelly into the big wide world.
Suddenly you’re an official graduate. It had to happen sometime, after all no one can live on a staple diet of cider and pasta for their entire life time.
Along with graduating comes the daunting prospect of finding a job and the realisation that the days of living off your trusty student loan are over.
Look around
Most students have to use a student overdraft to help fund their studies, but just because your student overdraft provider kindly funded your various drunken and intellectual exploits at university, doesn’t mean you have to stick with them for a graduate account.
Most student accounts automatically upgrade into a graduate account but make sure you take time to look around for other deals.
Have a hunt for the account with the longest interest-free period. This means you can have prolonged access to money whilst staying safely in the 0% zone.
After your happy with your choice, make sure that you’re on the ball with your overdraft limit, as this is where graduates can really get caught out.
Know your limits
Having a graduate account means that you’ll still have at least a year’s interest-free overdraft after leaving university and most banks actually increase your overdraft limit in the first year.
This can be really useful in helping you find your feet.
However, don’t assume that your overdraft limit will stay the same, as although most graduate accounts offer a three year interest-free period, the overdraft limit each year sneakily declines. The table below shows how the limits change on graduate accounts from some of the big high street banks:
Graduate accounts from the UK's biggest banks
|
Bank |
1st year |
2nd year |
3rd year |
Interest on unauthorised overdrafts |
|
£2,000 |
£1,000 |
£500 |
19.9% |
|
|
£1,500 |
£1,000 |
n/a |
19.9% |
|
|
£3,000 |
£2,000 |
£1,000 |
14.9% |
|
|
£2,000 |
£1,000 |
£500 |
19.24% |
|
|
£2,000 |
£1,500 |
£1,000 |
19.3% |
This means if you don’t pay off enough to reach your next limit in time, you will be stung with a hefty interest penalty as the unauthorised overdraft rate kicks in. Take the Barclays’ graduate account:A generous offer of a £3,000 overdraft limit may seem tempting, but by the second year the limit drops to £2,000.
So, if you’ve been complacent and not paid off the £1000, you will be hit with an interest rate of 14.9%.
Transfer your debts
If you are reaching the end of your interest-free period or you're struggling to reach your new limit before the time runs out, it’s a good idea to get a 0% purchase credit card.
This can be used as a lifeline to pay for your everyday expenses, while you use any other income to pay off your overdraft. Just make sure you pay off the card before the interest-free period ends.
Further down the line, if you’re having difficulty paying off your credit card before your interest-free period ends then it is a good idea transferring the payment to a 0% balance transfer card.
For a fee of around 3% of the money transferred, you can transfer the debt without it gaining interest within the allotted interest-free period. But BEWARE of the dastardly trap of negative order of payment.
Rachel Robson explains how negative order of payment works and how to avoid it.
This is when the cheapest purchases on your card are paid off first.
So although a card may have an enticing offer of 12 months 0% balance transfer and a three month 0% purchases, if you buy something expensive on your card and try to pay it off, you will be paying off the cheapest payment.
This means that the expensive purchase will accumulate hefty interest after the three month period.
An all-in-one card is the best option because then the interest-free periods for balance transfers and purchases are equal.
The Sanisbury’s Finance M’Card is a great option, offering a 12 month interest-free period for both balances and transfers.
Alternatively, only use your 0% balance transfer card for transfers and don’t make any purchases on it.
Make the most of your discounts
Being a student gives you the privilege of getting handy student discounts at loads of top retailers, but don’t think this immediately ends as soon as you leave university.
Most student cards are valid until the next academic term, so make the most of your discounts over the summer.
Recent question on this topic
- talltom asks:
Very Questionable Overdraft Charge?!?
- JoeEasedale answered "Only if you accept the overdraft. You could always move accounts, or stop relying on an overdraft...."
- MikeGG1 answered "If you make use of your overdraft, it is not unreasonable for them to check your creditworthiness..."
- Read more answers
If you’re planning on having some time off before finding a job, you can still use your student status to get great discounts on flights and accommodation at STA travel.
You can still enjoy student prices almost everywhere, so exploit all the use out of your student discount before, shock horror, you have to pay full price for things.
So there you go, getting clued up about graduate finances can really help you on the tricky transition into the working world.