- Arranged
- Agreed limit and interest rate
- Unarranged
- No agreement, with higher costs and risk
- Pricing
- Banks charge interest, not daily fees, since April 2020
- First step
- Contact your bank before you go over your limit
On this page
How overdrafts work
An arranged overdraft lets you borrow up to a limit your bank agrees, and you pay interest. An unarranged overdraft is where you go past your limit or without agreement, and can be much more expensive and lead to returned payments. Overdrafts are normally repayable on demand, so the bank can ask for the money back.
What the bank can do
- Reduce your limit or withdraw the overdraft.
- Ask you to repay it, sometimes in full.
- Use money paid into the account, including your wages, to reduce the overdraft. This is known as set-off.
- Record missed payments or default on your credit file, close the account and pass the debt to a collector.
Talk to a free adviser first
An adviser can look at your whole budget, deal with creditors for you and explain which option suits you. Get free debt advice.
Asking your bank for help
Banks must treat customers in financial difficulty fairly. You can ask for a lower limit that reduces over time, a repayment plan, a pause on charges or an interest freeze. Explain your situation and give an honest budget. Get any agreement in writing.
Ways to clear an overdraft
- Make a budget so that your income covers outgoings with something left over. Our budgeting guide can help.
- Move bills and payments to dates just after payday.
- Consider a cheaper way to borrow to clear it, such as a 0% product or credit union loan, but only if you will not slip back into the overdraft.
- If you have several debts, ask about a debt management plan, an IVA or a debt relief order.
If your wages go into an overdrawn account
Because of set-off, wages paid into an overdrawn account may be used to reduce the overdraft, which can leave you short for rent or bills. Talk to the bank before you do anything, and get advice about whether moving your income to another account is sensible in your situation.
Frequently asked questions
Will my bank close my account?
It can if you do not keep to the terms, but it should treat you fairly and give notice. Contact them early.
Can the bank demand the full overdraft back?
An overdraft is usually repayable on demand, but banks should not do so unfairly if you are cooperating and in difficulty.
What is an unarranged overdraft?
Borrowing you have not agreed with the bank. It can be costly, and payments can bounce, so contact your bank straight away if it happens.
Does an overdraft affect my credit score?
Yes. Heavy or persistent use can be visible to lenders, and defaults harm your record.
Can an overdraft be included in a debt solution?
Yes. An overdraft is unsecured debt and can be included, but that may affect the account itself, so ask an adviser.
This guide gives general information and is not personal advice. Rules and limits change, so check with a free adviser before acting. Last reviewed 11 November 2026.