Overdraft
If you need to borrow money for a short time or cover short-term costs, you could benefit from an arranged overdraft on your current account.
What is an overdraft?
An overdraft is a way to borrow money for the short term with your current account. They can be useful to help you:
- cover unexpected costs or emergency spending
- avoid or minimise fees for missing payments
- avoid being cut off from services.
There are two types of overdraft: arranged and unarranged.
Arranged overdraft
An arranged overdraft is where we set a limit you can borrow up to that you agree with us in advance. We decide how much you can borrow based on your credit rating and other information about you.
We charge interest on your overdraft when you start using it.
Unarranged overdraft
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 and you have not set up an arranged overdraft.
Your payments may be refused if you try to enter an unarranged overdraft.
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 consider other types of borrowing.
Any type of borrowing shows up on your credit file. However, unarranged overdrafts show as arrears, which can negatively impact your credit file and make it harder for you to get credit in the future.
Things to consider
- You must make regular payments into your account to reduce the amount you owe.
- You should think carefully about how you will repay your overdraft before you apply.
- You can request to remove or change your overdraft limit at any time.
If you have a smile or smilemore account you cannot reduce your overdraft limit below the automatic limit that comes with your account.
Interest, charges and costs
Interest rate
When you use an arranged or unarranged overdraft, we will charge you debit interest at an annual interest rate of 35.9% variable on the amount you are overdrawn by, unless you have an account with an interest-free overdraft.
You can check if you have an existing overdraft on your account in online banking, the mobile app or on your statement.
Charges
We will not charge you more than £60 for any type of overdraft charge (including debit interest) in one charging period. This means that the maximum you’ll pay in any charging period will be £60, regardless of whether you use an arranged overdraft, unarranged or both.
You can find more information about charges in our important documents.
Text alerts
To help you manage your money and limit any charges you might pay, we send overdraft text alerts when you go into (and when you're close to going into) an arranged or unarranged overdraft. We also send alerts if you have payments due that may not be paid due to you going into or being in your overdraft.
As long as we have your mobile number, we’ll automatically opt you into overdraft text alerts. You can opt out at any time by contacting us.
How we limit overdraft charges
Help to limit overdraft charges
We know that it's hard to keep track of what you've spent sometimes. You may accidentally go into your overdraft, or past your arranged limit. There are two ways we help limit the charges for our overdraft customers:
£60 monthly cap
We have a £60 cap on interest for any type of overdraft (arranged or unarranged) in one charging period. This means the maximum you will ever pay for using an overdraft per charging period is £60.
The monthly cap refers to the charges applied in a charging period not a calendar month. Please refer to the Account Charges Leaflet (PDF) for details of the charging periods.
Below is a standard definition to allow you to compare unarranged overdraft charges across different providers, but in practice we don't actually charge fees for allowing or refusing a payment where you have a lack of funds.
- Each current account will set a monthly maximum charge for:
a. going overdrawn when you have not arranged an overdraft; or
b. going over/past your arranged overdraft limit (if you have one). - This cap covers any:
a. interest and fees for going over/past your arranged overdraft limit;
b. fees for each payment your bank allows despite lack of funds; and
c. fees for each payment your bank refuses due to lack of funds.
Representative examples
The following example show representative Annual Percentage Rates (APR) for using an overdraft on our current account. Unlike interest rates, which only show you the interest you’ll pay, APRs include the interest rate and additional fees that come with the borrowing. This makes it easier for you to compare the cost of using different products with each other.
If you have a Smilemore account you will only start to be charged debit interest once you go over your £260 interest free overdraft.
smile Current Account
£500 credit limit
35.9% annual interest rate variable
35.9% representative APR variable
Duration for 1 year
Total amount payable is £679.44 which includes the £500 overdraft and £179.44 interest.
smilemore Current Account
£500 credit limit
35.9% annual interest rate variable
68.5% representative APR variable
The APR includes the monthly fee of £18.50 for maintaining the account, and an interest-free limit of £260
Duration for 1 year
How does our overdraft compare?
The representative APR provided can enable you to compare the costs across different products and providers.
What could an overdraft cost me in pounds and pence?
As an example, the interest you would pay for borrowing £500 for 7, 30 and 60 days is:
7 days
£2.98
30 days
£12.76
60 days
£25.66
This example is based on borrowing £500 on the first day of our charging period. It assumes you are overdrawn by this amount for 7, 30 or 60 days before repaying the balance. It does not take into account any interest-free overdraft limits provided with some accounts.
You can use our overdraft cost calculator to see the cost of using different overdraft limits over different periods of time.
Overdraft cost calculator
This tool will help you to understand what you'll be charged when you use an overdraft. We'll calculate how much interest you might pay on an arranged and/or unarranged overdraft.
Use our overdraft cost calculator.
Before you apply
Your application:
- is subject to status this means we'll assess your financial circumstances and complete credit checks
- will show up on your credit file - if it's unsuccessful and/or you make multiple applications in a short time, your credit score could be negatively affected, and this could make it harder for you to get credit in the future.
Don't have a current account with us?
You can apply for an overdraft when you apply for a current account.
Already have a current account with us?
To apply for an overdraft you must have a current account with us, check your eligibility and read and save the important documents.
Eligibility
Check if you're eligible
You can use our overdraft eligibility checker to check how likely you are to be accepted or rejected for the overdraft you’d like, before you apply.
Open overdraft eligibility checker
Alternatively, you can check the following criteria.
You must be:
- aged 18 years or over
- a UK resident
- employed, self-employed or retired (including medically retired).
If you’re not employed, self-employed or retired, you can still apply if you receive one or more of the following:
- pension income
- rental income
- disability benefit (Disability Living Allowance, Incapacity Benefit, Personal Independence Payment or Universal Credit equivalent)
- child maintenance
- child tax credits (or Universal Credit equivalent)
- working tax credits (or Universal Credit equivalent)
- carer's allowance
- statutory maternity, paternity or shared parental pay
- employer-paid maternity or paternity allowance
- universal credits – only alongside salary, wage or disability benefits.
You must not:
- be applying for an overdraft for a Cashminder account
- have had any County Court Judgements or defaulted on any credit agreements in the last 2 years
- currently be 2 or more payments in arrears on any credit agreement
- have had any Individual Voluntary Agreements or trust deeds, or been declared bankrupt, in the last 6 years.
Read and save important documents
You must read these important documents and save a copy for future reference.
Our lending commitments and what we ask of you (PDF)
smile Current Account overdraft pre-contractual agreement (PDF)
smilemore Current Account overdraft pre-contractual agreement (PDF)
Financial Services Compensation Scheme Information Sheet and Exclusion List (PDF)
What happens next?
We aim to respond with the outcome of your application within 5 business days, although it may take a little longer. We'll let you know we've received your request and provide any updates by email.
If you need a quicker response, please call us on 03457 212 212. Lines are open Monday to Friday, 8am to 6pm and Saturdays and Sundays, 9am to 5pm. Call charges apply.
Remove your overdraft
To ask to remove your overdraft, you can:
- Send us a secure message by logging in to online banking
- Call us on 03457 212 212. Lines are open Monday to Friday, 8am to 6pm and Saturdays and Sundays, 9am to 5pm. Call charges apply.
Annual interest rate
The annual interest rate is the interest on the money you borrow, equivalent to if you borrow the money for a whole year.
APR
APR stands for Annual Percentage Rate – it’s an illustration of the cost of borrowing over a year, taking into account the interest rate and any additional fees, and you can use it to compare the cost of similar products.
Arrears
Arrears refers to money that is owed and overdue.
Charging period
The charging period is the period used for charging interest, commission and charges – unless we tell you otherwise on your statement, it’s the fifth day of the first month of the charging period to the fourth day of the next month. When these dates do not fall on business days, the charging period will begin or end, as applicable, on the next business day.
Details of any interest or charges that may be applicable will be shown along with your statements.
Medically retired
Being medically retired means you’ve taken early retirement because you have a health condition or disability that stops you from being able to do your job.
Overdraft limit/Credit limit
Your overdraft limit or credit limit is the total amount we agree in advance that you can borrow up to at any time using your overdraft – we decide how much we will allow you to borrow based on your credit rating and other information about you.
Variable
A variable interest rate means that the interest rate could go up or down.
Financial difficulties
Please get in touch with us as early as possible if:
- you're unable to keep up with bill payments
- you're in, or about to enter, an unarranged overdraft on your account.
We'll be happy to discuss your needs and help you understand your options.