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.