Overdraft Facility

Overdraft facilities are available on many current accounts in the UK. An overdraft is an extension of the funds available for withdrawal. It is designed to be a short term loan, so that debit card payments and other transactions on the account can be honoured when account funds are not sufficient. If you have an arranged overdraft facility on your current account, it will be accompanied by a Maestro or Visa Debit payment system, which allows you to make payments that exceed the amount available in your current account.

A current account without overdraft facilities is more likely to use a Solo or Visa Electron card. This is because these cards verify your current account balance before each transaction is approved, thus, if you do not have the required funds, the transaction will be declined. Nevertheless, there may be instances that these cards may allow you to go overdrawn. Even if a transaction is approved, it may take up to two working days for the amount to be deducted from your current account balance. If, in the meantime you have authorised another payment, for example, you withdraw cash, you may no longer have the required funds to honour the transaction. In this case, your bank or building society would create an unarranged overdraft so that the transaction is fulfilled. This is an informal request for the overdraft service initiated when an account holder tries to withdraw funds exceeding the funds available, or exceeding the existing overdraft limit. There are large fees and interest charges for using an unarranged overdraft. Ensure that you have the required funds available in your account before making any transaction, whether this is a Solo, Visa Electron, Visa Debit or Maestro card, if you wish to avoid unnecessary cost.