How do overdraft interest rates work

Redundancy pay calculator. Universal Credit Find out how Universal Credit works and how to manage your payment. Tool Money Manager. Everyday money. Calculator Credit card calculator. Tool Couch to Financial Fitness. Calculator Baby costs calculator. Calculator Mortgage affordability calculator. Calculator Mortgage calculator.

Money troubles. Calculator Pension calculator. Calculator Workplace pension contribution calculator. Tool Find a retirement adviser. Calculator Redundancy pay calculator. Home Everyday money Types of credit. Everyday money Types of credit. Overdrafts explained. Overdraft charges Do you need an overdraft? How does an overdraft work? You can find out more on our guide Do you need to borrow money? Types of overdraft. See below for details of interest and fees charged on both types of overdraft.

Back to top. Overdraft charges. Use our Money Navigator Tool. Banks might, for example, reduce or waive interest, offer a continuation of overdraft borrowing at the current rate of interest, or agree on a repayment programme, which might include a personal loan. Speak to your bank or building society as soon as you can. If you feel vulnerable for any reason, explain your circumstances and your provider is obliged to take this into consideration. Is your household income getting squeezed?

Check you are receiving all the benefits or grants you might be entitled to. Do you need an overdraft? Using your overdraft too much? But overdrafts should only be used for emergencies or as a short-term option.

Compare bank accounts. Search for a better current account. Take a look at our Current accounts page for places to go to help you choose the right account for you. Want to feel more in control of your finances? Read our guide Switching bank accounts if you have an overdraft. Tips for controlling your overdraft. Keep an eye on your account balance. Keeping track of your account balance is one of the best ways to avoid overdraft costs.

Use savings if you have some. Find ways to live on a budget. Find out more in our guide Living on a budget. Switch banks. Find out more in our guide How to switch bank accounts.

More tips on cutting overdraft costs. For more tips and tricks on cutting the cost of overdrafts, visit the MoneySavingExpert website. Learn more in our guide How to reclaim unfair bank charges. Beware — your bank overdraft could be taken away. Read more about complaining on the Financial Ombudsman Service website. Was this information useful? Yes No. Thank you for your feedback. Share this article. Email Facebook Twitter. More options. Share this with. WhatsApp LinkedIn. Explore this topic Close Types of credit.

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What are overdrafts and how do they work? Written by Sebastian Anthony. What is an overdraft? How does an overdraft work? What overdraft limit will I get? How long can I have an overdraft for?

How much do overdrafts cost? How do banks calculate overdraft fees? Can I switch bank accounts if I have an overdraft?

The rate can change. Contact your bank or building society to apply for an overdraft. You may be able to apply online, by phone, or by filling out a printed application form. If you have a question about this topic you can contact the Citizens Information Phone Service on 07 Monday to Friday, 9am to 8pm.

You can also contact your local Citizens Information Centre or Request a call back from an information officer. Introduction If you have a current account, your bank may agree to let you use an extra amount of money when you have no money in your account. How an overdraft works Before you can use an overdraft, you should apply to your bank to make an overdraft available on your current account.

Fees and charges Many banks charge a fee for setting up an overdraft and an annual fee called a renewal fee for continuing it. If you go over your agreed overdraft limit, you may have to pay surcharge interest. How to apply Contact your bank or building society to apply for an overdraft. Page edited: 21 June Related Documents Glossary of debt terms Explains some of the commonly used words and terms in the areas of problem debt and personal insolvency.