Will switching to a graduate account help reduce my sons overdraft debt?
Dear Gareth,  My son is graduating from university this month, and despite the pubs being closed for much of his final year, he has ended up with a maxed-out overdraft. Hell be looking for work when he comes home, and Ill be ensuring he clears his debt. Name and address supplied  Gareth says  Dont be too hard on your son  I cant imagine what an odd and deflating experience it may have been for him to graduate during a global pandemic and not be able to celebrate the fruits of his efforts at the end of it all. The good news is that there are plenty of options to minimise the cost and stress of the debt your son has built up. Get financial advice and industry news, to you help manage your money Email address is invalid Thank you for subscribing! Sorry, there was a problem with your subscription. Student bank accounts, of which I assume he has at least one, are attractive because they offer interest-free borrowing throughout the years of higher education. But switching on to a graduate bank account means there isnt a dramatic cliff-edge of high interest rates. Graduate bank accounts maintain the offer of an interest-free overdraft for two or three years after graduating, but the amount that is interest-free reduces each year. The theory is that once the account-holder is earning, they can pay their debt down in line with the terms of the account, spreading repayments over time. The market for these accounts isnt uniform. For example, Nationwides FlexGraduate account offers a 3,000 interest-free overdraft in the first year after graduating, reducing to 2,500 in the second year, 1,750 in the third year and 1,000 thereafter. This means youll need to have paid off 500 in the first year to avoid interest. On the other hand, Santanders Graduate account gives a 2,000 interest-free overdraft for two years, which means that you dont have to worry about making a certain level of reductions in the first year. In the third year, however, the interest-free overdraft disappears  so youll need to pay off all your debt in 24 months. Most banks that offer student accounts also operate graduate accounts, and he should be switched automatically to a graduate version. But that shouldnt stop him from switching to an account that has a better overdraft offer. And contrary to what many think, being overdrawn is not a barrier to joining a new bank. A bank may see a graduate as a customer of the future  I have ended up taking multiple mortgages with the bank that was my graduate account provider  and welcome them with the offer of an interest-free overdraft. Read More Covid vaccine: MPs raise concerns about whether university students will get right jabs at right time  The key here will be making sure that the new account will offer the same overdraft as your sons existing bank. The student bank account provider will require the debt to be paid off within a couple of days of closing the account, so you need to be sure that you will be able to borrow the equivalent amount from the new bank. A word of warning: these accounts have been designed to help graduates pay off their debt. Failing to do so when moving from one interest-free tier to another will mean that any borrowing above the interest-free amount will be subject to interest. Rates for overdrafts can be as high as 39.9 per cent EAR. However, as a result of rules introduced last year, banks cannot charge daily or monthly fees when you go overdrawn and should be proactive in contacting a customer about their overdraft. When the term on the graduate account ends, the bank will probably move your son on to one of its fee-free accounts. At this point, he should be looking at the market to see if he can get a better deal elsewhere, based on how he uses his account and the perks that are most attractive. It takes just seven working days to switch accounts using the Current Account Switching Service. You can find out more about graduate bank accounts at which.co.uk/graduate.