What is an overdraft? And what's the difference between an 'arranged' and an 'unarranged' overdraft?

An overdraft is how much you’ve spent over the amount you have in your account. So if your account’s at zero and you spend an extra £1, that means you’re at -£1. This is what you’d call an overdraft.

An arranged overdraft is a set amount you can borrow up to, that you’ve agreed with your bank.

You do pay debit interest on however much you go overdrawn by.
If you haven’t arranged an overdraft and you’ve not got enough money to cover payments due, then we might either refuse the payment or allow it by agreeing to an unarranged overdraft. You'll also pay debit interest on this and unarranged borrowing may show as arrears on your credit file, which can cause a negative impact and make it harder for you to obtain credit in the future.
If we have a mobile number registered for you, we'll send you overdraft text alerts when you go into or are about to go into an arranged or unarranged overdraft. We'll also send alerts if you have payments due that may not get paid.

Find out more about the Overdraft Alerts Service.