warning about interest-free overdrafts for those who graduate

mr_rush

i had a hsbc student account when i was at medical school - £2000. came in very useful.

I knew it would be reduced by £500 every year.

However, I found later when reviewing my statements online that only the 'interest-free' portion was reduced by £500. The overdraft remained at £2000.

Therefore in my first year out of uni had I gone over £1500 into my OD, I would have been charged interest.

I had to phone up HSBC to specifically request my total OD be reduced every year, as the interest'free portion was reduced.

NOt sure if other banks do this but just in case...

emzig123

This happened to my bf, luckily he had paid off his OD but when he queried y the limit was so high, they told him!

morg_monster

One reason they do it this way is that they don't always remind you when the interest-free portion is decreasing. You usually remember the first year, but in the 2nd, third year etc after graduating you can't remember exactly what day it is the limit decreases... they usually don't send you a letter and then it is a surprise when you find you've been charged a bit of interest that month and realise your limit must have decreased again. If they reduced the WHOLE overdraft down, then you would be charged £30 or whatever probably each time it decreased!!

If you are still in your overdraft, make sure you have written in your diary when the limit decreases so you aren't caught out!

si1503

mr_rush wrote:

i had a hsbc student account when i was at medical school - £2000. came in very useful.

I knew it would be reduced by £500 every year.

However, I found later when reviewing my statements online that only the 'interest-free' portion was reduced by £500. The overdraft remained at £2000.

Therefore in my first year out of uni had I gone over £1500 into my OD, I would have been charged interest.

I had to phone up HSBC to specifically request my total OD be reduced every year, as the interest'free portion was reduced.

NOt sure if other banks do this but just in case...

Surely that is better than taking it off you and charging you fees for unarranged borrowing? Hardly a bad thing IMO.

Karnam

it is a v fair system if you ask me. you might not be used to staying well within your overdraft limits so this is a gentle system of allowing you to pay off the o/d debt slowly and with the awareness that in future o/d will be interest charged.

melancholly

what morg_monster said is very true - you won't usually get a letter a year after graduation telling you that the limit is decreasing. it's very important to know exactly what date this is happening to make sure you don't end up with charges that could have been avoided. it's also worth checking what date the bank thinks you graduated compared to when you actually did.