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01 Oct 2024

Best bank accounts for overdrafts 2024

To avoid expensive bank account charges, see our table of the current accounts offering the cheapest overdrafts.

Chiara CavaglieriSenior researcher & writer

In this article

What is an overdraft?

An overdraft allows you to spend more than you have in your current account.

It's essentially a loan from your bank and you'll be charged interest.

Here we reveal the current accounts with the cheapest overdrafts, to help save you money.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of an overdraft provider before committing to any financial products.

Best banks for overdrafts

The first table lists the current accounts with the cheapest overdrafts based on a scenario of borrowing £500 for seven days.

The second table lists current accounts with interest-free overdraft 'buffers', useful if you occasionally dip into your overdraft.

Overdraft tables

Cheapest overdrafts


Cumberland Building Society Cumberland Plus	n/a	14.99%	£1.34
RECOMMENDED PROVIDER Starling Bank Current Account	83%	15%	£1.35
Virgin Money M Plus Account	68%	19.9%	£1.75

Table notes: Data correct as of 1 October 2024. Excludes private bank accounts. If a provider uses risk based pricing, you may receive a higher rate - the rates listed here are offered to at least half of customers. Find our Which? customer score methodology here.

Current accounts with overdrafts reviews

Starling - 15% EAR overdraft for some

Starling is a Which? Recommended Provider for current accounts, following our 2023 customer survey, and offers one of the cheapest overdraft on the market – but only if you have an excellent credit score.

Overdrafts are charged at 15%, 25% or 35% EAR dependent on the outcome of your affordability assessment and credit score.

Starling uses credit reference agencies TransUnion and Equifax to help it decide how much to charge you and rates will be reviewed on a monthly basis (though your rate will only change once in any 12-month period).

The maximum overdraft is £5,000, subject to status. Use the bank's eligibility tool before applying for the account to see whether you're likely to be offered an overdraft.

Starling sends instant notifications when you're using your overdraft and you can use the app to see how many days you've had your overdraft, and how much interest you've accrued.

First Direct - 0% overdraft up to £250

First Direct has been named a Which? Recommended Provider once again, following our 2023 customer survey.

It offers an interest-free overdraft of £250 on its standard current accounts (subject to status), however if you borrow more than £250, you'll pay 39.9% EAR.

Use the bank's eligibility tool before applying for the account to see whether you're likely to be offered an overdraft.

Bear in mind that First Direct shares deposit protection (£85,000) with its parent bank HSBC.

Monzo - 19% EAR overdraft for some

Monzo charges 19%, 29% or 39% EAR depending on your TransUnion credit score.

The bank allows customers to borrow up to £2,000. You can change your overdraft limit from the app at any time. If you want to cancel the overdraft you must pay back the amount you borrowed, plus any interest owed.

Use the bank's eligibility tool before applying for the account to see whether you're likely to be offered an overdraft.

It doesn't proactively change anyone's overdraft rate, so if your credit score improves, you'd need to pay off your overdraft and re-apply to get a better deal.

Although Monzo received a very high customer score in our 2023 bank survey, it missed out on being a Which? Recommended Provider because it hasn't signed up to the authorised push payment (APP) scams code.

Nationwide FlexDirect - 0% for a year

Although Nationwide's FlexDirect account offers an interest-free overdraft for a full year, we haven't included it in our table because after this, you'll be stung with a rate of 39.9% EAR.

You can use the building society's eligibility tool before applying for the account to see whether you're likely to be offered an overdraft.

Don't switch to this account if you aren't confident you can clear the overdraft debt within a year.

If you've held a FlexDirect account in the past 12 months, you won't be eligible for the interest-free overdraft.

Nationwide received a high score in our 2023 customer survey and earned four out of five stars for its branch service.

How do overdrafts work?

The equivalent annual rate (EAR) is the interest you would pay if your account were to remain overdrawn for a whole year.

It takes into account compound interest (charging interest on interest) but does not include any additional fees you may be asked to pay for going overdrawn.

Banks may also refer to the annual percentage rate (APR), which shows you the cost of credit including any additional fees, assuming you borrow £1,200 over the course of a year. Banks will often advertise a 'typical APR' rather than the actual interest rate (which will depend on your credit record) but it must offer this headline rate to at least 51% of potential customers.

There used to be a difference between arranged and unarranged overdrafts and how much they cost.

But since 2020 banks have to charge a flat percentage-based interest rate for overdrafts.

All overdrafts are now 'arranged', in the sense that you must apply for them while setting up the account. You don't need to apply each time your balance goes below £0.

A handful of banks will still impose a fixed fee if there aren't enough funds in your account and a payment (eg a direct debit, cheque, or standing order) bounces.

Overdraft limits are usually set when you first apply to open an account, based on your individual financial circumstances.

Occasionally banks will offer an automatic overdraft, but generally they will consider your monthly incomings and outgoings, your credit score and employment status before deciding how much they're willing to offer you.

Your bank might agree to extend your overdraft limit at a later date, either temporarily or permanently. But all banks can reduce or cancel an overdraft at any time.

Overdrafts show up on your credit report.

However, lenders treat overdrafts in different ways when deciding whether to lend to you.

If you're applying for a mortgage, lenders will ask to see your bank statements (typically your last three months' worth).

Using an arranged overdraft sparingly shouldn't cause any problems, unless you've applied for more finance or demonstrated poor money management in other ways.

However, living in your overdraft from month to month or having missed payments could scupper your chances.

Firstly, not all overdrafts cost the same, as you can see from the tables in this guide.

Secondly, overdrafts are a very flexible form of credit, because you're free to borrow as much or as little as you like up to your agreed limit, and can pay it back without incurring an early repayment fee.

However, they are a very expensive way to borrow long-term, particularly if your bank charges a daily or monthly fee as well as debit interest. An unsecured personal loan is more suitable for long-term borrowing.

Being overdrawn shouldn't stop you from switching to a new account - it should encourage you to shop around, because overdraft users are more likely to gain from switching than other customers.

When you switch using the seven-day Current Account Switching Service (CASS), your overdraft can be transferred over, although your new bank might not match the overdraft limit you had before.

If you can't move the old overdraft over to the new account, you will need to repay some, or all, of the existing overdraft before you switch.

Most joint bank accounts are run on an 'either-to-sign' basis, where all parties can authorise transactions and make decisions independently.

Crucially, this means anyone can increase or decrease an overdraft. Also, each person is responsible for the overdraft, even if they didn't run up the debt.

Banks can even transfer money from any other accounts you hold with them to cover the debt on your joint account (but not the other way around).

An overdraft isn't the cheapest way to borrow for the long term (an unsecured personal loan may be better). If you're struggling to pay your overdraft off, try the following:

Ask your bank to extend your overdraft or waive the fees to give you some breathing space.
Use mobile and online banking to check your balance regularly and keep an eye on outgoings.
Sign up for text alerts to warn you when you're approaching your overdraft limit to help you avoid charges.
Change payment dates to make sure standing orders and direct debits leave your account at the right time, ideally shortly after you get paid.
Switch to a cheaper bank offering an interest-free overdraft or lower overdraft charges.
Shift the debt to a 0% credit card if you have a large overdraft that you can't pay off quickly. Read our guide to learn the golden rules for transfers.
Open a basic account with no overdraft facility if you think this will help you to manage your money better.

Find out more in our guide to how to deal with debt