What is an Overdraft? | Overdraft Definition | NatWest

An overdraft lets you borrow extra money through your current account. For example, if you have no money left in your account and you spend £30, ... JumptoAccessibilityJumptoContentPersonalBankaccountOverdraftsWhatisanOverdraftOverdraftsLearnmoreabouthowoverdraftsworkOnthispageWhatisanoverdraft?Howdoesanoverdraftwork?Howmuchwillmyoverdraftcost?EligibilitycheckerCostcalculatorFrequentlyaskedquestionsSetupanoverdraftWhatisanoverdraft?Anoverdraftletsyouborrowextramoneythroughyourcurrentaccount.Forexample,ifyouhavenomoneyleftinyouraccountandyouspend£30,yourbalancewouldbe-£30.Thismeansyou’reusinganoverdraft.Anoverdraftisaformofdebtandisrepayableondemand.Alwaysmakesureyouhaveenoughmoneyinyourcurrentaccount,orasuitablearrangedoverdraftlimitinplacebeforeanypaymentsareduetocomeoutofyouraccount.Typically,you’llagreeanoverdraftlimitwithyourbankorlender–thisisknownasanarrangedoverdraft.Howdoesanoverdraftwork?Therearetwotypesofoverdraft: arranged and unarranged.An arrangedoverdraft iswhenweagreetoalimitthatletsyouspendabitmoremoneythanyouhaveinyourcurrentaccount.Thiscouldhelpyoumanageyourmoneyifyouhavetocovershort-termexpensessuchasanunexpectedbill.An unarrangedoverdraft iswhenyouspendmoremoneythanyouhaveandyouhaven’tpreviouslyarrangedanoverdraftlimitwithus,oryouhaveexceededyourexistingoverdraftlimit.It'simportanttorememberthatbothtypesofoverdrafthaveassociatedchargesbutyou'llonlypayinterestifyouuseit. Thisinterestchargeisdependentonyouraccountandyoucanreadfulldetailsofthiswhenyouapplyforanoverdraft.Howmuchdoesmyoverdraftcostinpoundsandpence?Tohelpbringthistolife,here'sanexampleoftheinterestcostwhenyouusea£500arrangedoverdraft.Tellus,whichcurrentaccountdoyouhave?SelectRewardRewardSilverRewardPlatinumRewardBlackSelectSilverSelectPlatinumBlackPremierRewardPremierSelectTimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£1.7230days£7.3760days£14.85Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:19.49%EAR(variable).RepresentativeAPR:19.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthistableshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£3.2430days£13.8760days£28.13Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:39.49%EAR(variable).RepresentativeAPR:39.49%APR(variable).Assumedcreditlimit:£1,200TimeperiodInterestcost7days£1.7230days£7.3760days£14.85Whatdoesthisshowme?CloseCloseIllustrativeexampleTheabovetableisaspecificillustrativeexamplerepresentingtheinterestcostofusinga£1200arrangedoverdraftoverperiodsof7,30and60days. Lookingtounderstandthecostofanoverdraftofmoreorlessthan£500?Useourhandy Overdraftcostcalculator.CloseRepresentativeExample:EffectiveAnnualRate:19.49%EAR(variable).RepresentativeAPR:19.49%APR(variable).Assumedcreditlimit:£1,200Howdoesouroverdraftcompare?AgoodwaytocomparethecostsofborrowingproductsisbyusingtheAPR,whichshowsthecostofborrowingoverayear.BeforeyouapplyforanoverdraftCheckyourchancesofbeingacceptedbeforeapplyingUseouroverdrafteligibilitycheckertofindoutifyou’relikelytobeapprovedbeforeyouapply.Ittakesjustafewminutesandwon’timpactyourcreditrating.EligibilitycheckerFindouthowmuchinterestyou'relikelytopayUseouroverdraftcostcalculatortoseehowmuchinterestyou’dpaybasedonyourowncircumstancesandborrowingamount.CostcalculatorHowtoapplyforanoverdraftAlreadyhaveacurrentaccountwithus?YoucanapplyforanarrangedoverdraftonlineifyouareregisteredforOnlineBanking.Compareourrangeofoverdraftsanddecideononethat'srightforyou.AvailabletoeligibleNatWestcurrentaccountcustomers,UKresidentsaged18orover.Subjecttolendingcriteria.CompareoverdraftsNewtoNatWest?You'llneedacurrentaccountwithusbeforeyoucanapplyforanarrangedoverdraft.StartbyexploringourcurrentaccountrangeandhowyoucouldswitchtoNatWest.Accounteligibilityandcriteriaapply.ExploreswitchingtoNatWestStep-by-stepguidetoapplyingonlineplaybuttonHelpingyoustayincontrolofyourspendingMobilebankingappOurmobilebankingapphelpsyoukeeptrackofyourspendingonthego.Keepaneyeonmoneycominginandoutofyouraccount.GetstartedwiththeappFreetextalertsYoucansetupfreetextalertsandgetnotificationswhenyourbalancegoesaboveorbelowacertainlimit.Wecanalsoletyouknowifyou'reabouttoslipintoanunarrangedoverdraft.SetuptextalertsOverdraft,creditcardorloan?Ifyou'reunsurewhichtypeofborrowingtouse,we'llwalkyouthroughyouroptionstohelpyoudecidewhat'srightforyou.WaystoborrowSeewhatotherpeopleareaskingWhataretheprosandconsofanoverdraft?CloseCloseWhataretheprosandconsofanoverdraft?Overdraft,loanorcreditcard?Ifyou'reunsurewhichtypeofborrowingtouse,itcanbetrickydecidingwhichtypeoflendingisrightforyou.So,we'vesummarisedtheoptionsandtheiradvantagesanddisadvantagesinourhandyguidebelowforyoutoeasilycompareandcontrast.ExploreyourborrowingoptionsCloseIsanoverdraft,creditcardorloanbetterforme?CloseCloseIsanoverdraft,creditcardorloanbetterforme?Weunderstandthatthereareanumberofdifferenttypesofborrowing,whichcanbeoverwhelming.Fromoverdrafts,toloans,tocreditcards,onourwaystoborrow pagewe’llshowyoutheropes. CloseCananoverdraftaffectyourcreditscore?CloseCloseCananoverdraftaffectyourcreditscore?Creditscoresarebasedonlotsoffactors,suchastheamountofcredityouhave,theaverageageofaccounts,andthenumberofinquiriesonyourcreditreport.Anarrangedoverdraftisunlikelytohaveamajorimpactonyourcreditscoreaslongasyoudon’tgobeyondyouroverdraftlimitorhavepaymentsrefused.Infact,ifyouuseyouroverdraftsensiblyandregularlypayitoff,itcouldimproveyourcreditrating.However,youroverdraftcouldnegativelyaffectyourcreditscoreifyouregularlygobeyondyouroverdraftlimitorintoanunarrangedoverdraft.Formoreinformationaboutcreditscores,whynottakealookatourCreditscoringguide.Whenyouapplyforanytypeofcredit,includingoverdrafts,itwillimpactyourcreditscoreasacreditcheckisperformedaspartoftheapplication.That’swhyit’sagoodideatocheckyourchancesofbeingaccepted beforeyouapply.CloseDoyoupayforanoverdraftifyoudon’tuseit?CloseCloseDoyoupayforanoverdraftifyoudon’tuseit?It’simportanttorememberthatanoverdrafthasassociatedcharges,butyou’llonlypayinterestifyouuseit.Ifyou’relookingtounderstandmoreabouthowmuchinterestyou’dpaybasedonyourowncircumstancesandborrowingamount,headonovertoourOverdraftcostcalculator.CloseWhatisEARandAPR?CloseCloseWhatisEARandAPR?EARstandsforEffectiveAnnualRate.Thisisequivalenttotherateofinterestyou’llpayifyou’reoverdrawnforayear.You’llpayinterestontheamountyou’reoverdrawnby,andontheinterestthatbuildsupfrombeingoverdrawn.Soyou’llpaylessifyouregularlypayoffyouroverdraft.EARdoesn’tincludeotherfeesthatmaybecharged.APRstandsforAnnualPercentageRate.ItiscalculatedinthesamewayastheEAR.APRisawaythatlendersshowtheinterestandadditionalchargesyouwillpayonwhatyou’reborrowing.APRcanalsobereferredtoasthe‘fullcostofborrowing’.Butwedon’tchargeanyotherfeesforusinganoverdraft,soourEARandAPRarethesame.YoucanuseourOverdraftcostcalculator toworkouthowmuchinterestyou’dpaybasedonyourowncircumstancesandborrowingamount.CloseHowdooverdraftfeeswork?CloseCloseHowdooverdraftfeeswork?AtNatWest,wedon’tchargefeesforusingyouroverdraft,justinterest.Ifyou’relookingtounderstandmoreabouthowmuchinterestyou’dpaybasedonyourowncircumstancesandborrowingamount,headonovertoourOverdraftcostcalculator.It’simportanttoknowthatthereareotherchargesassociatedwithoverdraftssuchasanUnpaidTransactionFees.AnUnpaidTransactionFeeischargedforatransactionthatisreturnedunpaidbyyourbankorlender.Atransaction(e.g.aDirectDebit)willbereturnedifthepaymentcannotbemetfromfundsinyouraccountoranyunusedarrangedoverdraftfacilityandyourbankdecides(attheirdiscretion)nottomakethepayment.MonthlycaponunarrangedoverdraftchargesUsuallythereisacaponunarrangedoverdraftcharges.Thismeansyouwon’tbechargedmorethanacertainamountinachargingperiodforanunarrangedoverdraftorunpaidtransaction. 1.Eachcurrentaccountwillsetamonthlymaximumchargefor:goingoverdrawnwhenyouhavenotarrangedanoverdraft;orgoingover/pastyourarrangedoverdraftlimit(ifyouhaveone). 2.Thiscapcoversany:interestforgoingover/pastyourarrangedoverdraftlimit;feesforeachpaymentyourbankallowsdespitelackoffunds;andfeesforeachpaymentyourbankrefusesduetolackoffunds.Themonthlycaponunarrangedoverdraftchargesforourstandardadultcurrentaccountsis£19.40. Tofindoutmoreaboutourfees,pleasereadthe‘Overdraftfeesandcharges’sectioninour Usefulinformationaboutoverdrafts.CloseSomethingelsewecanhelpyouwith?TypeyourquestionhereOpensinanewwindow