At last, banks wake up to young workers

Once overlooked as students got all the best deals, school leavers who go straight into a job can now see signs of progress. Esther Shaw and Jessica Smith report

High-street banks may be scrapping for our current-account business, with inducements ranging from debit cards paying cashback to higher interest on balances in credit, but one group of customers has been left out in the cold: school leavers heading straight into employment.

High-street banks may be scrapping for our current-account business, with inducements ranging from debit cards paying cashback to higher interest on balances in credit, but one group of customers has been left out in the cold: school leavers heading straight into employment.

Young men and women shunning university because of financial fears - the average graduate debt is now more than £12,000 - or a desire to make money as soon as possible are some of the least-loved current-account customers out there.

This is surprising given that these 16- to 18-year-olds are taking their first real financial steps, and a good bank account deal could nurture lifelong loyalty. They will be earning straight away too - unlike the thousands of students racking up debt from day one but feted by banks in the hope they'll eventually turn into high earners.

"Students are enticed with generous packages because they are seen as good business for the future," says Stuart Glendinning from financial analyst Moneysupermarket.com. "They get heavily overdrawn, which in effect locks them into the account - making them long-term customers."

That's not the case for those who steer clear of higher education. "Banks have traditionally regarded young workers as earning lower wages because they are carrying out less-skilled work," says Mr Glendinning. "This can make it difficult for them to get full current-account services."

Traditionally, many deals for this group have lacked key features such as cheque guarantee cards. But this is starting to change as banks realise that young workers might one day be wealthy customers who want to buy other products.

Only a few of these special "young worker" accounts are available at the moment - including HSBC's Right Track into Work and Royal Bank of Scotland's R21- and, by law, people aged under 18 aren't allowed to have an overdraft. However, the banks are demonstrating their enthusiasm for the youth pound by offering other incentives. Barclays' First Additions account, for example, boasts free mobile phone insurance and discounts on leisure activities and computer goods.

First Additions, like the other "young worker" accounts, reaches beyond teenagers to those in their early twenties, at which point all these deals offer little that mainstream current accounts don't and the "young worker" tag could simply be called marketing.

However, they still have their selling points. Byron Jenkins, from St David's in Pembroke-shire, has just opened one of these accounts to take better control of his finances. For the past eight months, the 22-year-old has been working as a builder, and he now pays his salary into First Additions each month.

"I was attracted by the interest-free overdraft and being able to manage my money over the internet," he says, citing the comprehensive mobile phone cover as another big benefit.

The Barclays account offers cardholder protection and a legal helpline, as well as a £250 interest-free overdraft. But this comes at a price - a monthly £4 fee - and any credit earns a miserly 0.1 per cent interest.

Elsewhere, Alliance & Leicester's Young Worker account for those aged 16 to 21 pays the slightly higher rate of 0.25 per cent but is linked to a savings account paying a far more competitive 4.5 per cent. There is a flat monthly fee of £3 on authorised overdrafts, but watch out if you break through your limit as unauthorised borrowing will cost you an additional fee of £25. If you do not get your balance down to the authorised level within a matter of days, you face another £25 charge - capped at £50 a month.

Royal Bank of Scotland pays 2.25 per cent on its R21 account for 16- to 21-year-olds, but charges 16 per cent on an authorised overdraft at age 18-plus - rising to 29.84 per cent and a £10 charge for unauthorised borrowing.

Mr Glendinning warns young workers to be wary of such penalties. "This [age] group is prone to spending more than they earn, and could end up suffering if they are not careful."

If you have a young worker account, don't automatically move up to the bank's mainstream deal once your salary begins to take off: you could get a better deal elsewhere.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Extras
indybest
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    AIFMD Business Analyst / Consultant - Investment Management

    £450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

    Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

    £450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

    Manager - SAS - Data Warehouse - Banking

    £350 - £365 per day: Orgtel: Manager, SAS, Data Warehouse, Banking, Bristol - ...

    SQL DBA/Developer

    £500 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, Linux, SQL Se...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
    Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

    Lauded therapist still in limbo as battle to stay in Britain drags on

    Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law