HSBC may prove to be the wrong bank for graduates
March 15, 2008
In the past students in the UK that have needed an overdraft facility have enjoyed this facility free of charge from banks, and have also been given time to repay the overdraft without having to pay any interest on it for a specified period after graduating from college or university. HSBC is one of the banks that have granted this facility, but the bank has recently announced a decision to scrap an element of this facility, which means that students could face a raw deal on their overdraft.
HSBC has decided that instead of granting students an additional interest free period following graduations to repay the overdraft – a period that was usually three years – it will now start charging interest right away on the overdraft as soon as the student graduates from university. An interest rate of nearly 10% will be charged on overdrafts, and as a result of this experts are urging consumers to think carefully whether HSBC is the right account for them in terms of overdraft facilities.
The interest free period of three years will still be made available to some graduates, but in order to quality they will need to sign up to a premium account with the bank, which will cost them £10 per month to run. According to officials from the HSBC adding this charge to overdraft facilities right away when the student leaves education will enable them to learn more effectively about managing finances.
One official from the bank stated: ‘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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