Being a student comes along with a lot of perks. Not only do students get discounts at many name-brand stores, but they also receive a lot of perks when it comes to banking.
Most banks in Canada will offer perks such as no monthly fees and no overdraft fees for students who are in college or university. But what happens after you graduate?
Let’s take a closer look at Student Bank Accounts in Canada and how you can continue receiving perks after you graduate from school.
What are Student Bank Accounts?
Before we dive into Graduate Bank Accounts, let’s start from the beginning – with Student Banking. Student Accounts are, as you have probably already guessed, bank accounts that are explicitly designed for students that are in college or university. These types of bank accounts come along with several perks that are designed to help students save money.
In most cases, student banking accounts come in the form of chequing accounts. In addition to offering low to no monthly fees, these types of bank accounts also offer no minimum balance requirements, unlimited debit transactions, and no-interest overdraft options.
Of course, the features of each student bank account will differ from bank to bank, so be sure to speak with a banking representative to learn about your different options.
Just as each financial institution will offer its own features, each institution will also have its own requirements to open a student account. On that note, most banks will require you to be enrolled full-time in a post-secondary program to open one.
Some banks will also require you to be between the ages of 18-25, but this will vary from bank to bank.
What happens when you Graduate?
Once you graduate from your post-secondary program, most banks will automatically switch you to a chequing account. In most cases, they will use your transaction history to choose the best account for you.
For example, if you make many banking transactions, they will choose an account that is best geared towards that activity, perhaps an account that offers unlimited transactions.
Of course, as soon as your bank account is switched over, you automatically become responsible for any fees associated with that account. Depending on which account your bank chooses for you, these fees could be high or low.
That’s why it’s so important to speak to your bank as soon as you graduate – so that you can have a say in the account that you would like to use moving forward.
What is a Graduate Bank Account?
In some cases, your bank may automatically switch you over to a Graduate Bank Account; in other cases, you may have to request one. These accounts are designed specifically for graduates and are designed to help you pay off your student loans and debts incurred while in post-secondary education.
The main benefit of a Graduate Account is that most offer interest-free overdraft options up to a specific amount for several years after you graduate. Over time, your bank will gradually reduce the amount of money you can borrow interest fees, providing you with encouragement and motivation to pay off your debts.
Changing from a student account to a graduate account can also increase your likelihood of being accepted for a loan. Most banks offer very competitive graduate account loans.
To apply for a graduate account, you will need to show proof of certificate. Banks in Canada will allow you to hold a graduate account for 2-3 years after graduating from post-secondary.
Graduate Accounts vs. Normal Accounts
Each type of bank account comes with its own benefits and downfalls. Graduate accounts don’t charge you an interest fee, but you also don’t receive many of the perks that come along with regular accounts.
On the flip side, regular accounts will charge you overdraft fees (unless you upgrade to an account that doesn’t), but you will also receive a higher interest rate from the money in your account.
Choosing the right account for you really comes down to your individual needs. If you have a large amount of student loans or debt to pay off, a Graduate account can help you do so. If you are debt-free, it might be safer to just go with a regular bank account.
Graduate Loans vs. Student Loans
It’s important to understand that Student Loans and Graduate Loans are two completely different things. Student loans are given to students who are in post-secondary education and are designed to help them pay for tuition, housing, books, and other school-related things.
Student loans are usually funded by the Government and are very lenient when it comes to payback. Most student loans don’t start incurring interest until after graduation, and even then, interest is low.
Graduate loans are designed to help you pay off debt once you finish college or university. They are designed with 0% interest for the first few years so that you are motivated to gradually pay it off before interest incurs. The main benefit of these is that when you pay $0 interest, more of your money can go towards paying off your debt.
How to Choose a Graduate Bank Account
When it comes to switching over bank accounts, many people feel that sticking with their own bank is usually the best option. And while this might be the most convenient option, it’s not always the best one.
That’s because sticking with your bank doesn’t provide you with any additional perks. If you switch your student account over to a graduate account with the same bank, you’ll receive all of the incentives that come along with graduate accounts but no additional ones.
Banks reserve their perks and incentives for new customers that they are trying to entice to join their bank. And for this reason, switching to a new bank can sometimes be a better option. It will take a little extra effort, but the new bank will usually provide you with better incentives to make that effort worthwhile.
A word of caution when it comes to Graduate Bank Accounts
We are all for Graduate Bank Accounts – they are a great way to help you save some money while at the same time paying off your debts. But you need to be cautious with their limits, or you can quickly go into more debt than when you started.
All Graduate accounts allow you to go into overdraft, but they also have an overdraft limit. If you go over this limit, you will be charged hefty interest fees each day until it is paid back.
Most Graduate Accounts will also start charging for daily transactions if you’re over your overdraft limit, resulting in even more built-up fees. For this reason, you need to be very cautious in how much you spend. Stay below your overdraft limit to avoid heavy interest charges.
In addition, it’s important to remember what a Graduate Account is really for – helping you pay back your loans. Don’t look at your overdraft as an option to spend more. Look at it as an opportunity to start paying back.
Depending on the account you choose, you should have three or more years to pay back your overdraft fees. Set aside a small budget each month to start paying off your loan so that you can have it completely paid back once your graduate account expires.