We aim to make our website as accessible as possible. However if you use a screen reader and require debt advice you may find it easier to phone us instead. Our phone number is 0 8 0 0 1 3 8 1 1 1 1. Freephone (including all mobiles).

Overdraft debt

Overdraft debts. How to deal with them

An overdraft is a type of credit that’s linked to a bank account. It allows you to spend more money than is in your account, up to an agreed limit.

Overdrafts are a type of consumer credit and it’s important to remember that they're repayable ‘on demand’. This means that the bank can ask for the money back in full, at any time.

Overdrafts have significantly higher interest rates than they used to. These rates are now typically higher than standard credit cards. This now makes overdrafts a very expensive way to borrow money.

Need debt advice?

Free, online debt advice available now

Get debt help

How does an overdraft work?

You may receive an overdraft automatically with a new current account, or you may have to request one.

An arranged overdraft is where your bank agrees that you can spend more money than is in your account, up to a certain limit. You’ll be charged interest while you’re using the overdraft, but there won’t be any further charges to pay.

An overdraft is a form of credit that can be taken away at any time, without notice, by your bank.

Dealing with bank account debts

As well as overdrafts, some accounts charge a monthly fee or require you to pay in a certain amount of money each month. If you’re paying a monthly fee and can't afford it you should consider changing to a fee- free account.

Think about whether you’re getting value for money through the account you have. For example, if you pay £15 a month for your account, it’s costing you £180 over a year.

The two main types of account are:

Basic accounts - these accounts don't have an overdraft or a cheque book, so you can’t spend more money than you have. Some basic bank accounts come with cash cards which you can use in cash machines. Other accounts come with debit cards. Most basic accounts let you set up standing orders and direct debits.

Although your credit rating will be checked when you open a basic account you should still be approved, regardless of your credit history.

Current account - current accounts generally come with an optional overdraft, cheque book and debit card. You’ll be able to set up direct debits and standing orders on the account.


The bank's likely to check your credit rating when you open the account, and may refuse your application based on your credit history. You might have to pay a certain amount of money into the account each month, or pay a monthly fee.

Overdraft debt and coronavirus

Many people use overdrafts in times of crisis like this, when their income has reduced, or they have an unexpected expense they hadn’t budgeted for. However, with interest and charges added, an overdraft can be an expensive form of credit.

Help with overdraft debt

The FCA has instructed banks to support customers affected by the coronavirus by:


  • Offering interest-free overdrafts of up to £500 for up to three months
  • Ensuring customer credit ratings won’t be affected if they use an interest-free overdraft
  • Introducing a flat rate of interest on all overdrafts to make sure nobody is worse off as a result of the changes
  • Some banks may also be willing to increase overdraft limits to support customers who are struggling with their finances. However, it's important to consider the longer-term impact this could have on your credit file.

Be aware that if you’re on a debt solution, taking out extra credit could go against the terms of your agreement. Always speak to your debt solution provider before considering this as an option.

Worried about your overdraft debt?

Overdrafts can be very difficult to deal with. Once you’ve reached your overdraft limit it can be hard to pay it back, and interest will continue to be added to your debt.

We can give you tailored advice on budgeting and money management, as well as helping you with your debts.

Use our online debt advice tool, or call us (freephone, including all mobiles). All of our debt advice is tailored to your personal situation and completely free of charge.