HSBC has been forced into a humiliating U-turn over overdraft charges for graduates after a online campaign orchestrated by students using the social networking site Facebook.

The bank announced yesterday that it would no longer charge new graduates interest on their overdrafts.

Most high street banks allow graduates at least a year’s grace to pay off their student debts without levying interest. But as The Times revealed in June, HSBC decided to start charging new graduates interest at the beginning of this month.

About 250,000 graduates were hit by interest charges of 9.9 per cent on overdrafts of up to £1,500.

HSBC said that it would refund the interest paid so far this month and drop the rate to zero. It insists that the move to freeze interest charges on overdrafts is temporary and that it would discuss options with the National Union of Students soon.

Andy Ripley, HSBC’s head of product development said: “Following the feedback from our graduate account holders, both directly and via the National Union of Students, we have taken the decision to freeze interest charging on 2007 graduates’ overdrafts up to £1,500 and refund any interest charged in August.”

Joe Garner, the general manager of HSBC UK Bank, said: “We would love to go on Facebook and we have been having a discussion around that, but its uncharted territory.”

The NUS believes that using Facebook was critical in winning over HSBC. Wes Streeting, NUS vice-president and founder of the Facebook group, said: “Running the campaign through Facebook has been tremendously successful. We wouldn’t have been able to mobilise students during the vacation without it.”

HSBC admitted that the online protest had contributed to its decision.

Andrew Hagger, of the financial website Moneyfacts, said: “Banks give students and graduates free overdrafts in the hope that they will keep them into their adult lives. I don’t know whether this will be enough to retain graduate customers.”