An overdraft is a way to borrow money short-term with your current account and can be useful for covering unexpected costs or emergency spending. They can help you avoid or minimise fees for missing payments or make sure you aren’t cut off from services.
Overdrafts are not suitable for long-term borrowing. If you're using your overdraft in this way or becoming reliant on it, you may wish to look at other types of borrowing that might better meet your needs.
You can check if you have an existing overdraft on your account and how much that is in online banking, the mobile app or on your statement.
What are the different types of overdraft?
There are two kinds of overdraft: arranged and unarranged.
An arranged overdraft is a set amount you can borrow, that you’ve agreed with us in advance. We charge interest on your overdraft, using an interest rate we agree on, before you start using it.
Tips for using your arranged overdraft
- You must make regular payments into your account to reduce the amount you owe
- When applying for an overdraft limit, you should think carefully about how you will be able to repay
- You can request to change or remove your overdraft limit at any time
If you go over your arranged overdraft limit, you’ll enter an unarranged overdraft. You’ll also enter an unarranged overdraft if your account balance falls below £0, before you’ve set up an arranged overdraft.
Your payments may be refused if you go over your overdraft limit or try to go overdrawn without an arranged overdraft in place.
Charges and credit file impacts
When you use an arranged and/or unarranged overdraft, you will be charged debit interest at an annual interest rate of 35.9% on the amount you are overdrawn by, unless you have an account with an interest free overdraft. You can find more information about charges here.
Any type of borrowing shows up on your credit file. However, an unarranged overdraft shows as arrears - this can negatively impact your credit file and may make it harder for you to obtain credit in the future.
How we help limit overdraft charges
£60 monthly charge cap
We will not charge you more than £60 for any type of overdraft charge (including debit interest) in one charging period. This means that whatever type of overdraft you use (arranged or unarranged or both), the maximum you will pay per charging period will be £60.
Text alerts when you go into your overdraft
To help you manage your money and limit any charges, we now send overdraft text alerts.
- These alerts will notify you either before you go into, or when you’ve entered into an arranged or unarranged overdraft.
- We’ll also send an alert if you don’t have enough money in your account to cover any payments coming out that day.
As long as we have your mobile number, you’ll be automatically opted in for overdraft text alerts. You can opt out of arranged and/or unarranged overdraft alerts at any time by contacting us. You can opt out of arranged and/or unarranged overdraft alerts at any time by contacting us.
How to manage your overdraft limit
You can request to change or remove your overdraft at any time by calling 03457 212 212 (charges apply). You must make regular payments into your account to reduce the amount you owe.
If you have a Smilemore account, you won't be able to reduce your overdraft lower than the interest free £260 overdraft facility.