Graduation means waving goodbye to your student account

AS SOON as you graduate your student bank account is withdrawn and your bank will offer you a new banking relationship. Students should receive letters from their banks notifying them of the change in the run-up to their finals.

The emphasis will be on reducing your interest-free overdraft. You must either accept their terms or try to move your debt elsewhere. Bank of Scotland and Halifax, for example, do not offer a graduate account as such. Their student account permits a 3,000 interest-free overdraft, although this is not automatic and is subject to credit status.

Once you graduate, this interest-free overdraft extends for a year, after which it comes to an end. If you haven't reduced the debt you will have to negotiate a paid-for overdraft. Interest may vary according to your credit score.

Other banks do offer more time to get back into the black, by transferring you to a graduate account. Former Royal Bank of Scotland student account holders are currently being switched over to its graduate offering, which gives customers up to three years to reduce their debt.

In the first year they can still maintain a 2,000 interest-free overdraft. Come the second year, the maximum interest-free overdraft is 1,500, falling to 1,000 in year three. If they need to borrow more they can apply for an authorised overdraft costing 9.9 per cent.

Lloyds Bank offers similar arrangements, with 2,000 interest-free during the first year after graduation, followed by 1,500 in year two and 1,000 in year three.

HSBC requires debts to be cleared within two years. It permits 1,500 interest-free borrowing the first year after leaving college, falling to 1,000 in year two.

Clydesdale provides no interest-free credit lines.