Bank Accounts with Overdrafts - Best Overdraft | moneyfacts.co.uk

Bank Accounts with Overdrafts

  - You should always avoid expensive overdraft fees. Compare these interest-free buffers and look for overdrafts with the lowest costs.

Compare the Best Accounts with Overdrafts

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Overdraft Rate (EAR)Account FeeAdditional InformationSearch all
144 accounts

15.90%
Fee: £0.00
£10.00 pm
  • No arranged overdraft fees
  • No interest paid on credit balances
  • Switch Service Guarantee member
Details...
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. Representative Example: Based on an overdraft limit of £500. Up to £250.00 charged at 0.00% EAR Variable. Over £250.00 charged at 15.90% EAR Variable. Overdraft fee of £0.00 per request.

15.90%
Fee: £0.00
None
  • Low arranged overdraft interest rate
  • No interest paid on credit balances
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500. Up to £100.00 charged at 0.00% EAR Variable. Over £100.00 charged at 15.90% EAR Variable. Overdraft fee of £0.00 per month.

14.90%
Fee: £0.00
None
  • No funding requirement. No overdraft fees
  • No credit interest and no account benefits
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 14.90% EAR Variable. Overdraft fee of £0.00 per month.

18.90%
Fee: £0.00
None
  • Credit interest paid and Clubcard points awarded on card purchases
  • Internet applications only
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 18.90% EAR Variable. Overdraft fee of £0.00 per month.

18.90%
Fee: £0.00
None
  • Cashback on operating account
  • No interest free overdraft buffer
  • Monthly funding of £800 required
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 18.90% EAR Variable. Overdraft fee of £0.00 per month.

18.90%
Fee: £0.00
None
  • Existing customers who refer a friend both receive £100 when switching completed
  • Must fund account at least £750 each month
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 18.90% EAR Variable. Overdraft fee of £0.00 per month.

19.90%
Fee: £0.00
None
  • No arranged overdraft fees
  • £500 per month funding requirement
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 19.90% EAR Variable. Overdraft fee of £0.00 per request.

19.84%
Fee: £6.00 Per Month
£17.00 pm
  • Breakdown, travel and mobile phone cover
  • No credit interest payable
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500. Up to £300.00 charged at 0.00% EAR Variable. Over £300.00 charged at 19.84% EAR Variable. Up to £300.00 overdraft: fee of £0.00 per month. Over £300.00 overdraft: fee of £6.00 per month.

12.50%
Fee: £6.00 Per Month
None
  • Credit interest payable up to £2,000
  • Fees charged for arranged overdraft usage.
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 12.50% EAR Variable. Overdraft fee of £6.00 per month.

19.89%
Fee: £6.00 Per Month
None
  • No minimum funding required
  • High rate of interest on overdrafts
  • Switch Service Guarantee member
Details...
. Representative Example: Based on an overdraft limit of £500 charged at 19.89% EAR Variable. Up to £10.00 overdraft: fee of £0.00 per month. Over £10.00 overdraft: fee of £6.00 per month.
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Last Updated: Sunday 25 February 2018 00:42

Moneyfacts.co.uk Best Buys show the best products chosen by our independent experts. Where we have been able to we have also provided a link for you to apply online today. Products shown with a yellow background are sponsored products.

Disclaimer:

All overdrafts are subject to the applicant’s status. You may not be offered credit. All rates and fees are subject to change without notice. Please check all rates and terms before borrowing.

Moneyfacts.co.uk Limited is an independent credit broker not a lender. We will receive a payment from credit providers where customers link to them from Moneyfacts.co.uk. None of these arrangements affects our independence.

 

Overdraft accounts explained

Overdrafts aren't something we like to think about, but to avoid losing some of your hard-earned money to your current account provider, it's important to consider what your current overdraft arrangement is, especially if you can do better.

What is an overdraft?

Simply speaking, an overdraft is a debt you go into by spending more of your current account funds than you have. The moment your current account goes into the red, you step into your overdraft - unless of course your bank account does not allow any overdraft, in which case your payment will simply fail.

To make things a bit more complicated, there are two types of bank overdraft. If your current account provider has previously agreed that you can go into debt, i.e. an overdraft, you will be able to go into an arranged overdraft. Going over an arranged overdraft, or going into debt where there is no arranged overdraft, on the other hand, is called an unarranged overdraft.

Providers usually charge different fees for arranged and unarranged overdrafts; arranged overdrafts generally result in smaller fees, or even none at all. That's why you should always apply for an overdraft if you can, as unarranged overdraft charges can accumulate quite quickly.

For instance, if your provider charges you a fee of £5 per day for an unarranged overdraft and it takes you a week to pay off the debt, you would then owe your provider £35. Sometimes, this would happen even if you go just a few pence below zero.

This example also illustrates that in most cases it's better to pick an account with an interest rate charge instead of a flat daily fee, with a 5% interest rate remaining cheaper than £5 until you go more than £100 into the red, even if both were calculated daily. And unlike most flat fees, interest rate charges tend to be calculated on a monthly basis, so you'd need to stay £100 in the red for seven months to owe your provider the same £35.

Of course, you'd rather not pay your provider anything at all and keep your money. That's why it's so important to consider the overdraft when choosing a current account, especially as some providers charge both interest and a fee.

How to compare overdraft accounts

The overdraft accounts featured on this page are bank accounts with free overdrafts or low overdraft charges. The best current account with overdraft featured at the top of the table will likely allow interest and fee-free overdrafts, or at least free arranged overdrafts up to a certain amount. This could make all the difference if you frequently find yourself dipping slightly into the red.

It's important to look at more than just the overdraft charges to find the right account for you, however. Some may charge a monthly fee, which could outweigh the benefits of low (or no) overdraft fees, while others may have additional benefits that could make up for having some overdraft fees attached.

What to look out for when comparing current account overdrafts will depend on your specific circumstances - particularly how often and far you are planning to slip into your overdraft. For some, a small interest-free overdraft buffer might be sufficient, as it would mean that you wouldn't get charged any interest if you only go £10 or £20 into the red. Others, who are more likely to go into larger debt, will need to look at the overall interest rate charged on the account.

Remember that different providers will have different overdraft limits, so if you are looking to use an overdraft for a somewhat larger debt, see what limit a provider offers. This may be influenced by your credit score and will likely not be the cheapest way to borrow money.

The EAR mentioned in the table above could be useful for comparing interest rates. It refers to the Equivalent Annual Rate, which looks at the interest you would be charged if you were to remain overdrawn for an entire year. It also compounds the interest, which is why it can look quite steep.

Should I get an overdraft account?

If sitting in your current account's overdraft is a familiar problem and you're tired of paying expensive fees for doing so, it may be time to switch to an account that offers a cheaper overdraft option, like the ones on this page. You will have to have a decent history of paying off your overdraft and other debts within a reasonable timeframe, however, otherwise providers will be reluctant to let you bank with them and use their credit facilities. If you have a bad credit score, a basic bank account or even a guaranteed account (which does not require a credit check) might be a better fit for you.

For those with a decent credit score who would like to have low or no overdraft charges, even if they never intend to go into the red, there are some advantages and disadvantages to consider:

Advantages:

  • Overdrafts offer a safety net in case of emergencies and prevent bills and other important payments from falling through due to a lack of funds
  • As these accounts are specifically focused on offering you value for money when it comes to slipping into the red, they are likely to offer some sort of interest and/or fee-free overdraft buffers, which could save you a lot of money in overdraft charges

Disadvantages:

  • You don't want to get too tempted to keep going into your overdraft, as this could have a negative effect on your credit score
  • You may miss out on account interest or other current account benefits that are not offered on overdraft accounts, but are available on high interest current accounts

How to apply for an overdraft account

You can apply for a current account with overdraft as you do for any other current account, by talking to the provider you want to move to via their preferred communication method. If you're looking to switch your current account over entirely, the Current Account Switch Service should be a great help, as it automatically moves your direct debits and standing orders over, so you don't have to worry about missing payments.

Before you apply for anything, however, remember to check your credit rating. Your credit score at the time of application will greatly affect whether you get the account or not, so if there's anything you can do before applying to improve it, don't hesitate.

Also remember that changing your bank account will likely reduce your credit score slightly, due to the credit check that will be part of the application, so be sure of which account you're after before you apply and don't immediately apply for a different account if you get rejected.

What next?

How to improve your credit score
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