More than a quarter of a million undergraduates have been popping champagne corks this month after finishing their final exams, but few will have made it through three years of study without a huge overdraft and a maxed-out credit card.

The last thing they may want to think about now is their debt-laden finances, but failure to make sure they have the best current account could prove expensive. Traditionally, banks have allowed graduates three years’ grace to shrink overdrafts before they start to charge interest.

But last week HSBC ended its free overdrafts for graduates, meaning that those who fail to switch to another bank will be clobbered with interest charges from August. Those who do not take action will pay nearly 10 per cent interest on their student overdrafts, a charge of about £12 a month for those with the maximum student overdraft of £1,500. Only those who pay £9.95 a month, nearly £120 a year, for a premium account will keep their free overdrafts.

But there are plenty of options for graduates who want to save money by avoiding interest charges for a couple more years. NatWest, Abbey, Lloyds TSB and Royal Bank of Scotland (RBS) all offer interest-free overdrafts of £2,000 for new graduates, dropping to £1,000 in the second year after graduation and £500 in the third. Barclays offers an interest-free overdraft for only two years.

New graduates with the Halifax and Cooperative Bank are given a year’s grace to shrink their overdrafts because they do not provide specialist graduate accounts.

After a year Halifax will charge 6.9 per cent interest on its student overdraft. With the maximum overdraft of £2,750, that means a charge of £189 a year, or £15 a month. Cooperative Bank charges 12.9 per cent after 12 months on a maximum overdraft of £3,000.

If you have a job lined up for September, you could give the graduate accounts a miss and opt for the Premier Direct current account from Alliance & Leicester. As long as you are earning at least £500 a month you will be given a free overdraft for a year, and when you persuade a friend to join, too, you will pick up £40 each. You can sign up as many friends as you like, earning £40 a time.

Do not worry that your huge overdraft makes you a less-appealing customer; most banks are happy to take on graduates with students debts. Mary Taylor, of NatWest, says: “It is absolutely straightforward for someone with a student overdraft to switch after graduating. All you need do is show us your graduation certificate and the usual proofs of identity.”

Once you have secured a good interest-free overdraft, be wary of other special offers. For example, banks often promote “preferential” loan rates for graduates, typically charging between 7.5 per cent and 8.9 per cent. Barclays and NatWest offer loans with a typical rate of 7.9 per cent, while Abbey charges 7.5 per cent. But just because the banks describe these rates as preferential, it does not mean they are the best on the market. For instance, Masterloan charges only 6.1 per cent on a £5,000 loan repaid over three years.

Lisa Taylor, of Moneyfacts. com, the comparison website, says: “Graduates are given special deals on mortgages, loans and savings accounts by their banks, but they are not always the best buys.”

Despite your best intentions, it is easy to get into a tight spot and slip past your overdraft limit, so it’s worth checking out the interest rate and charges if you do exceed your limit.

It is always cheaper to arrange an extension with your bank before you go into the red. Andrew McDougall, of Barclays, says: “In eight out of ten cases where our customers have asked for an overdraft we have been happy to do it. It is worth giving the bank a call because we can probably help. At the end of the day it is only a phone call.”

RBS, Abbey and HSBC all charge 9.9 per cent on authorised overdrafts, while Barclays, Lloyds TSB and NatWest charge between 15 per cent and 17 per cent. If you do not arrange the extension first, however, the rate leaps to almost 30 per cent with RBS and 27.5 per cent with Barclays.

You will not be penalised so heavily for exceeding your overdraft limit at HSBC, where the rate remains at 9.9 per cent. However, this is small consolation if you have lost your interest-free overdraft.

The banks also charge additional fees of between £10 and £38 for exceeding your overdraft limit and for any bounced payments.

For ten ways to deal with debt, go to timesonline.co.uk/borrowing

CASE STUDY: Free overdraft is key

Isla Currie, of Eastbourne, East Sussex, has been with HSBC since she was 16 and stuck with the bank when she started university because it offered her a five-year railcard.

This week Miss Currie, left, graduated from the University of Bath with a BSc in business management and intends to leave HSBC and switch to a graduate account with Lloyds TSB after hearing of HSBC’s plans to charge interest on graduates’ overdrafts.

“I could not believe it when I heard that HSBC will start to charge interest on my overdraft,” she says. “It doesn’t seem fair; I will not have had a chance to find a job by the time the bank starts charging interest in August.”

Miss Currie managed to pay off some of her overdraft during a work placement this year, but she remains almost £600 overdrawn.

She says: “One of my friends has already transferred to Lloyds TSB so I thought that I would follow suit. Why would I pay for something that I can get free somewhere else?”

Waste not, want not

If you bought a TV licence for your college room last year and it has at least a full quarter to run, you could be eligible for a £33.88 refund. Visit www.tvlicensing.co.uk/information/students.jsp.

Upgrading your mobile phone? Then make some money from your old handset. Sell it and help the environment by visiting www.envirofone.com, which will quote you a price when you enter in the details of the phone.

Flog your textbooks at www.sellstudentbooks.com. The website will offer to buy your books, or you can sell direct to buyers via the website.

Going travelling? Pick the best credit card. The Post Office and Nationwide have no foreign-exchange loading for ATM cash withdrawals.