Compare Bank Accounts with Overdrafts

  • A good overdraft facility on your bank account can be a huge advantage in times of financial difficulty and save you money on penalty charges
  • Compare accounts with overdrafts available from the major high street banks and internet providers below
  • Compare up-to-date information on account features to find your ideal account

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Information written by Connor Campbell Last updated on 19 April 2022.

How does an overdraft work?

An overdraft comes into play once the balance in your current account hits £0. Once you go below £0, you are ‘overdrawn’.

What happens next, however, is dependent on whether or not you have an arranged overdraft account.

An arranged overdraft has a set limit and interest rate agreed between you and your banking provider. If you have an arranged overdraft, you can borrow up to your approved limit and will pay interest on the amount you have borrowed until it is cleared.

If you don’t have an arranged overdraft, then you may be able to access an unarranged overdraft. This is when there isn’t enough money in your account to cover a transaction but the payment is allowed to go through by your bank nonetheless. It can also include going beyond the agreed limit of your arranged overdraft.

This will usually incur unarranged overdraft usage fees. Most banks will have a maximum monthly charge, the size of which will differ from provider to provider.

Not every bank account has an unarranged overdraft function. If it doesn’t, the bank will instead look to reject or refund the transaction in question.

Benefits of a bank account with an overdraft

There are a number of benefits to having a bank account with an overdraft.

  • You can avoid missing payments that could incur penalty charges and/or negatively impact your credit score.
  • Immediate access to extra funds if you need them.
  • Overdrafts only kick in when you need them - this makes them different to, and potentially cheaper than, personal loans.
  • Unlike other forms of borrowing, there is not usually a charge attached to paying an overdraft off early.

Disadvantages of a bank account with an overdraft

There are also disadvantages to having a bank account with an overdraft.

  • Overdrafts offer smaller amounts of available money than personal loans or most credit cards, meaning it might not be suitable for your needs.
  • Interest rates can be higher than other methods of borrowing.
  • An overdraft isn’t guaranteed once you have one - your bank can withdraw it at any time.
  • If you borrow more than your arranged overdraft limit, it could negatively impact your credit score

Bank accounts with free overdrafts

Since April 2020, banks are not allowed to charge a fee simply for having an overdraft. In this sense, having a bank account with an overdraft is now ‘free’.

In terms of interest, it is possible to find bank accounts that offer a 0% arranged overdraft rate on a certain portion of your overdraft limit. You would then pay interest on anything over that stated amount.

To find and compare the bank accounts with free overdrafts, take a look at the product table on this page.

What you need to know before getting an overdraft

There are a few things you should become familiar with before applying for or using an overdraft.

Overdraft fees

When looking to choose a current account with an overdraft, you should compare the arranged overdraft rate of each option.

To do so, you can look at the EAR (effective annual rate) or the representative APR (annual percentage rate) on each account for a direct comparison.

If you go into an unarranged overdraft, you will normally be charged interest at the effective annual rate attached to the type of account you are using. You may also incur an unpaid transaction fee.

These interest rates vary from account to account and provider to provider, but can be as high as 40%.

Setting up alerts

Banking providers are required to alert you, be it via a text or a mobile banking app, if you are about to slip into an unarranged overdraft.

Therefore it is important to make sure that your details are correct and up to date.

You can also set up email, text or push notification alerts to notify you of when you are about to go into your arranged overdraft.

Buffers

Many bank accounts with an overdraft have an ‘interest-free buffer’. That is an amount of your overdraft that you won’t pay interest on or be charged a fee for, designed to cover the odd unforeseen transaction without charge.

This can differ from overdraft accounts that offer 0% interest on a larger portion of your overdraft limit. The types of accounts that offer 0% on a larger amount of funds will typically be for a limited time or only available given you meet certain requirements so always check your individual account T&C’s.

Managing your overdraft through an app or online

It is important to keep on top of your overdraft, and make sure you pay it off as soon as you can.

» MORE: How can I pay off my overdraft quickly

The dedicated banking app or online login associated with your account will allow you to manage your overdraft with ease.

Am I guaranteed to get a bank account with an overdraft?

You are not guaranteed to get a bank account with an overdraft. Each provider has its own rules for who is eligible for an overdraft.

You may be able to check your eligibility for an overdraft on the website of the banking provider in question.

Can I get an overdraft if I have bad credit?

When you apply for an overdraft, a bank will do a soft credit check. Therefore if you have bad credit, you may find it difficult to get a current account with an overdraft.

If you do have bad credit, you could instead consider ways to improve your score before applying for an overdraft.

» MORE: How to improve your credit score

How much overdraft can I get?

Overdrafts can range from small amounts like £10 or £25, to thousands of pounds.

The size of your overdraft limit will be dependent on a number of factors, including the type of current account you have or are looking to open, and your financial health, based on your income and credit history.

How to apply for an overdraft

There are a few different ways you can apply for an overdraft, depending on your circumstances.

How to get an overdraft on your current account

If you already have a current account, you can usually apply for an overdraft on that account via your banking app or online login. If you want to talk to someone about your decision, you can also apply in person at a branch or over the phone.

How to switch to a current account with an arranged overdraft

If you are eligible, and want to switch to a current account with an arranged overdraft, then you can use the free Current Account Switch Service via your banking provider.

This service will switch your payments and transfer your balance to your new account, and take care of closing your old account.

How to open a new account with an overdraft

First you will need to apply for a current account.

Use our NerdWallet comparison page to work out which current account with an overdraft you want, and then follow the steps as set out by your chosen provider.

During the process you will be asked if you would like to set up an overdraft. This will require proof of address (usually for the last 3 years), employment and income details, and a successful credit check.

Alternatives to an overdraft

Overdrafts should only be used to cover short-term financial emergencies. If you need more help, then you should consider other borrowing options. These could include credit cards or personal loans.

» MORE: Loan, overdraft or credit card?

How does Nerdwallet’s overdraft account comparison work?

Our comparison table shows four key features related to each current account with an overdraft. These are, moving left to right:

  • Monthly Fee
  • Interest Rate
  • Arranged Overdraft Rate
  • Minimum Monthly Credit

You can sort the table by all four of these metrics, as well as by Featured Product and Company A-Z.

The most relevant when searching for an overdraft account is the Arranged Overdraft Rate.

Each deal also has a representative example of an arranged overdraft, including the EAR and representative APR.

Overdraft Bank Accounts FAQs

Is it bad to use an overdraft?

It is not bad to use an overdraft. However, they should only be used for short-term emergencies, rather than as a long-term solution to financial difficulties.

It is important to stay on top of your overdraft, and try to avoid going into an unarranged overdraft as best you can.

Does an overdraft affect my credit score?

If managed well - that is, staying within your overdraft limit, and regularly paying it off - having an overdraft may mean lenders look at you more positively when it comes to applying for future borrowing.

However, repeatedly falling into an unarranged overdraft will start to harm your credit score.

When it comes to applying for an overdraft, or applying to increase your overdraft limit, most banks will do a soft credit check that won’t affect your score.

Yet some may do a hard search, which will be visible on your credit report. By itself, this won’t necessarily hurt your credit score. But a lot of overdraft applications in a short space of time will.

Can I switch bank accounts if I’m in my overdraft?

If you are within your arranged overdraft, but have a good credit history, you should be able to switch bank accounts.

However, you will still need to pay off the existing balance on your old account. And your new bank may not automatically give you an overdraft.

» MORE: Switching bank accounts with an overdraft

Can I get a joint bank account with an overdraft?

Yes, you can get a joint bank account with an overdraft.

Before that, you should make sure that you trust the person you are opening the account with, as all account holders are liable for paying off an overdraft.

What’s an overdraft ‘buffer’?

An overdraft buffer is an amount of money in your arranged overdraft that you won’t pay any interest on or be charged for. This could be anything from £10 to £250 depending on your account.

Can I close a bank account when overdrawn?

No, you will not be able to close a bank account until you have paid off your overdraft.

When do I need to repay my overdraft?

Overdrafts don’t usually have a time limit on borrowing but could cost you each month you have an outstanding balance. In addition, if you have an overdraft balance, you owe the bank money and, in theory, they could request this back at any time. However, this is unlikely to happen unless you repeatedly exceed your limit, for example.

How to pay off an overdraft?

To pay off your overdraft, you will need to move the amount of money you owe into the current account in which you are overdrawn.

This could be a case of budgeting and making small payments bit-by-bit, or paying it off all at once.

What should I do if I am struggling to pay off my overdraft?

If you are struggling to pay off your overdraft, then there are a number of steps you can potentially take.

These include: Creating a budget and repayment plan. Contacting your bank for advice and support. Moving your overdraft to an interest-free overdraft. Dipping into your savings. Using a 0% transfer credit card. Getting a low-rate personal loan.

It may be advisable to seek advice from those that you trust. You could also consider contacting the Citizens Advice Bureau or Step Change Debt Charity.

Can I get a business bank account with an overdraft?

Yes, you can get a business bank account with an overdraft. These will often have far larger limits than a personal account overdraft.

Like with personal overdrafts, business overdrafts should only be used for short-term emergencies or unexpected expenses.

About the author:

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

Compare Current Accounts

What type of current account are you looking for?

7 products found
  • Barclays logo

    Barclays Premier Current Account

    • Monthly Fee
      Free
    • Interest Rate
      0%
    • Arranged Overdraft Rate
      35.0%
    • Minimum Monthly Credit
      None*
    See Deal + More info
    Representative Example: 0% interest (variable) payable on arranged overdrafts up to £500. If you use an arranged overdraft of £1,200, you'll be charged the equivalent annual rate of 35.0% (variable). Representative APR 19.5% (variable). Subject to financial status.
  • Virgin Money logo

    Virgin Money M Plus Account

    • Monthly Fee
      Free
    • Interest Rate
      2.02%
    • Arranged Overdraft Rate
      19.9%
    • Minimum Monthly Credit
      None
    See Deal + More info
    Offer
    Get 20,000 Virgin Points when you switch to an M Plus Account. UK, 18+. Apply online. Switch to M Plus or Club M with 2 direct debits, login to app, pay £1k into linked savings. Complete within 45 days of opening. Excl. M account, existing M, M Plus and Club M customers, closures since 31/01/22 & those who’ve taken up previous bundles or Virgin Red offers for switching to Virgin Money. Terms apply, may be withdrawn. Virgin Red membership required and programme terms apply.
    Representative Example: If you use an arranged overdraft for £1,200 you will be charged 19.9% AER Representative/EAR variable. Subject to financial status.
  • first direct logo

    First Direct 1st Account

    • Monthly Fee
      Free
    • Interest Rate
      0%
    • Arranged Overdraft Rate
      0%
    • Minimum Monthly Credit
      None
    See Deal + More info
    Offer
    Get £175 when you switch to First Direct* or £20 for opening an account** *To qualify, switch using the Current Account Switch Service and deposit £1,000 within 3 months of account opening. This offer applies to new customers only that have not opened a HSBC account on or after 1 Jan 2019. **Available to new customers who open a 1st Account and log into app/online banking within 3 months. This offer is limited to one payment only. This offer can’t be added to any other joiner or switcher offer.
    Representative Example: If you use an arranged overdraft of £1,200, you'll be charged the equivalent annual rate of 39.9% EAR (variable). Representative APR 30.5% (variable). 0% EAR variable on the first £250.
  • TSB logo

    TSB Spend & Save Plus Account

    • Monthly Fee
      £3
    • Interest Rate
      0%
    • Arranged Overdraft Rate
      39.9%
    • Minimum Monthly Credit
      None
    See Deal + More info
    Representative Example: If you use an arranged overdraft of £1,200, you’ll be charged the equivalent annual rate of 39.9% EAR (variable). Representative APR 40.1% (variable).
  • TSB logo

    TSB Spend & Save Account

    • Monthly Fee
      Free
    • Interest Rate
      0%
    • Arranged Overdraft Rate
      39.9%
    • Minimum Monthly Credit
      None
    See Deal + More info
    Representative Example: If you use an arranged overdraft of £1,200, you'll be charged the equivalent annual rate of 39.9% EAR (variable). Representative APR 39.9% (variable).
  • Revolut logo

    Revolut Current Account - Standard Plan

    • Monthly Fee
      Free
    • Interest Rate
      0.15%
    • Arranged Overdraft Rate
      24.99% - 39.90%
    • Minimum Monthly Credit
      None
    See Deal + More info
    Offer
    Sign up and get a free £10 top-up Make your first card payment to receive £10 credited to your account and 1 month of Revolut Premium for free. Offer available until December 31st 2022.
    Representative Example: 0% interest up to £50. If you use an arranged overdraft of £1,200, you'll be charged the equivalent annual rate of 35% EAR (variable). Representative APR 35% (variable)
  • Santander logo

    Santander 1|2|3 Lite Current Account

    • Monthly Fee
      £2
    • Interest Rate
      0%
    • Arranged Overdraft Rate
      39.94%
    • Minimum Monthly Credit
      £500
    See Deal + More info
    Offer
    £160 cashback when you switch to a Santander 1|2|3 Lite Current Account. £160 cashback when you complete a full switch to a Santander 1|2|3 Lite Current Account within 60 days, set up 2 Direct Debits, pay in £1,000 and log into Online or Mobile Banking. T&Cs apply.
    Representative Example: If you use an arranged overdraft of £1,200, you'll be charged the equivalent annual rate of 39.94% EAR (variable). Representative APR 39.94% (variable).

Please note: Our comparison service features a selection of providers from whom we receive commission. This table is initially ordered according to our commercial arrangements. You can use the options above the table to order it according to various criteria.

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