Overdraft Charges

An overdraft (see Overdrafts) is an extension of the funds available for withdrawal from an account. It is intended as a short term loan that the bank provides for a current account holder to enable payments to clear even if sufficient funds to cover the payment are not currently available. You may need to pay interest on your overdraft, and will usually be charged fees for going overdrawn when you had not previously arranged an overdraft facility.

The exact charges that are levied on an unarranged overdraft vary from institution to institution, but you will usually be charged a flat fee, either for each day you are overdrawn or as a one-off. You will typically be charged very high interest rates on an unarranged overdraft, certainly much higher than those charged on an arranged overdraft, because you have exceeded your credit limit without the agreement of the bank.