Santander to hike graduate account overdraft charges – however you may beat it by switching
Currently, those in their second year after graduating get a maximum interest-free overdraft of £2,000 on the 123 graduate account – but this is falling to £1,000 for those starting their second year after 1 July.
The change means that if you’re in your overdraft by more than £1,000 after your first year of having the graduate account, you’ll be hit with interest charges of 39.94%. For example, if you start your second year with the graduate account owing £1,500 – which could well happen given Santander offers many students a £1,500+ limit – you’ll now pay around £14 a month in interest.
In addition, from 12 April, those with both the 123 student and 123 graduate accounts will no longer earn 1% interest on in-credit balances of up to £2,000, as this is being axed.
There is, however, no change to how the overdraft works on the 123 student account – your entire overdraft will remain interest-free. There is also no change to graduate overdrafts in year one, as these will remain at up to £2,000 interest-free, while in your third year after graduating you’ll be rolled onto a regular Santander account with different overdraft charges (typically no interest-free buffer and 39.94% interest) – as is the case now.
You can only get Santander’s graduate account if you first had its student account. See our Student Bank Accounts and Graduate Accounts guides for the current best buys.
How can I beat the charges?
Here’s what you can consider to get around the new fees:
- If you want to keep the account, try to reduce your debts. Those who will be hit are those who come into their second year of having the graduate account owing more than £1,000. If you can, try to reduce the amount you owe so you fall within the new £1,000 0% buffer before the end of your first year on the graduate account. See our Free Budget Planner and Money Makeover guides for help.
- Consider switching. Alternatively, you could try switching to a bank offering graduates a bigger or longer 0% overdraft. Barclays, HSBC, and TSB, for example, all offer £2,000 interest-free overdrafts in year two – and crucially, you don’t need to have had their student accounts to apply – see our Graduate Accounts guide for full info. Just bear in mind that it’s up to the new bank to decide whether to offer you an overdraft and there are no guarantees.