This is Money - Graduates hit by new bank fees

Thousands of new graduates will be hit by bank charges this summer when HSBC ends their free overdraft facility.

The major banks have traditionally offered students free overdrafts while they are at university, with a gradual reduction to zero in the three years after they leave.

But yesterday HSBC announced an end to the postgraduate element of the perk. The bank will introduce an interest charge of nearly 10% on the overdrafts of customers who leave university this year.

They will be offered the chance to keep the previous deal of a three-year tapering facility, but only by opening a Graduate Plus account at a cost of £9.95 a month.

None of the bank's competitors said they would be following suit this year, but nor did they guarantee they would not do so in the future.

HSBC said it was a way of helping students realise that borrowing costs money.

But the Students' Union accused them of 'seeking to extract greater profits from hard-up graduates'.

The bank currently offers students a free overdraft of £1,000 in their first year at university, £1,250 in the second, and £1,500 in the third. It remains at £1,500 in their first year after university, and falls to £1,000 in the second, and £500 in the third.

But those leaving this year will be charged 9.9% on any overdraft from August. For a student on the maximum overdraft of £1,500, this will cost £12 a month, though the 9.9% still compares favourably to the 18.6% charged on overdrafts from the bank's standard current account.

Students who graduated before this summer will not be affected.

HSBC spokesman Karen Garner said: 'The new service is put together to create a more level playing field. We wanted customers to distinguish between being a student and graduate, because as the latter you are in a position to earn money.

'It softens the blow of realising the costs associated with borrowing, though we appreciate there is a risk that some students won't bank with us anymore.'

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