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Overdrafts

 

What is an overdraft?

Our arranged overdraft account allows you to borrow money from us through your current account. When your account reaches zero, an arranged overdraft account lets you continue to access money, even if your account has insufficient funds. An overdraft is useful for covering short-term outgoings, such as an unexpected bill.

Overdrafts are available on all our current accounts except for the Cash and Under 19s accounts.

What is an arranged overdraft?

This is an overdraft that you arrange with us in advance.

To get an arranged overdraft, you must be aged 18 or over and apply online, in a branch or on the telephone. We then run a few affordability checks and, if approved, we let you how much you can borrow.

Once approved, your overdraft will appear on your account immediately for existing customers and in a few days for customers new to TSB.

What are the benefits of an arranged overdraft?

Perfect for short-term borrowing
 

Perfect for short-term borrowing

If you need to borrow a small amount of money for a short period of time, an overdraft may be cheaper than a personal loan or credit card.
Simple fees and charges
 

Simple interest

Some of our overdrafts provide an initial interest free overdraft amount. If you borrow more than this you will be charged interest on the additional amount.
Insurance Icon
 

It’s flexible

You’re in control of your overdraft. You can ask to increase, decrease or cancel it at any time.

How much does an arranged overdraft cost?

Our overdraft calculator gives you an idea of how much an overdraft will cost you. The figures are based on the information you provide. We therefore recommend you use this calculator as a guide only because the actual cost may differ based on how you use the overdraft in real life.  

Overdrafts are charged monthly and are shown on your current account statement. The cost depends on how much your bank account is overdrawn and is made up of any interest that may be charged. The table below sets out the arranged overdraft interest from 14 July 2020.

Arranged overdraft fees and charges
  Spend & Save Plus Spend & Save
Classic Plus
(no longer available)
 Student Graduate
Interest-free amount £100     £1,500
£2,000
Interest on this additional amount
39.90% EAR
39.90% EAR
39.90% EAR
39.90% EAR
39.90% EAR
 

For information on overdrafts on our accounts that are no longer available to new customers, please visit either the Added Value or Other Accounts page.

Our overdraft rates will be a standard rate of 39.9% APR Representative (variable). 

How does my overdraft compare?

A good way to compare the cost of our overdraft with other overdrafts or other ways of borrowing is to look at the APR. The APR shows the cost of borrowing over a year.

Representative example

For Spend & Save you will be charged 39.9% APR Representative (variable). This is based on an assumed Arranged Overdraft of £1,200 without an interest free amount. On our Spend & Save Plus account you will be charged 40.1% APR Representative (variable). This is based on an assumed Arranged Overdraft of £1,200 and includes the effect of the interest-free amount and monthly maintaining the account fee. Arranged overdrafts are available to UK residents only, over 18, subject to application and approval. Overdrafts are repayable on demand.

What is an unarranged overdraft?

An unarranged overdraft is when you spend more money than you have in your account and in your arranged overdraft.

For example, you may try to make a Direct Debit payment and you don’t have enough money. If we agree, we'll provide you with an unarranged overdraft (or extend your existing one) to cover the payment. If we do not agree, you won't be able to make the payment (it will be refused due to a lack of funds).

Unarranged overdraft fees and charges
We'll never charge you more than £30 each monthly billing period.
  Spend & Save Spend & Save Plus Classic Plus (no longer available) Student Graduate
Interest on the whole amount
39.90% EAR / 39.9% Representative APR
39.90% EAR / 44.1% Representative APR
2.84% per month
39.90% EAR Representative APR
39.90% EAR / 39.9% Representative APR
39.90% EAR / 39.9% Representative APR
Returned item fee
£3.
If you don't have enough money in your account to make a payment and we decline your request for an unarranged overdraft, you will not be able to make that payment.
We don’t charge Returned item fees on our Spend & Save Plus accounts.
How does my overdraft compare?
A good way to compare the cost of our overdraft with other overdrafts or other ways of borrowing is to look at the APR. The APR shows the cost of borrowing for a year.
 
Representative example: If you use an arranged overdraft with a limit of £1,200 you will be charged 39.9% APR Representative (variable). Arranged overdrafts are available to UK residents only, over 18, subject to application and approval. Overdrafts are repayable on demand.
 
For overdraft information on our accounts that are not available to new customers, please visit either the Added Value or Other Accounts pages.

We’ll never charge you more than £30 each monthly billing period for the total of all these fees:

  • Unarranged Overdraft interest
  • Returned Item Fees

To make comparing bank products easier for you, banks are setting a maximum monthly charge for unarranged borrowing fees. Each bank may charge different fees, but all banks are explaining it the same way, with the same wording.

Monthly cap on unarranged overdraft charges

  1. Each current account will set a monthly maximum charge for:
    a) Going overdrawn when you have not arranged an overdraft.
    b) Going over/past your arranged overdraft limit (if you have one).
  2. This cap covers:
    a) Interest for going over/past your arranged overdraft limit.
    b) Fees for each payment your bank allows despite lack of funds.
    c) Fees for each payment your bank refuses due to lack of funds.

Full details of our fees and charges can be found in our Banking Charges Guide.

Banking Charges Guide (PDF)

You can find out more information about our Overdrafts here.

Overdraft Information (PDF)     Tips on reducing your Overdraft (PDF)

 

Overdraft FAQs

If you are over 18, you could be eligible for our arranged overdraft. You don’t need to be an existing customer, however if you are you could be eligible to borrow more.

Use our overdraft eligibility checker to find out if we can offer you an overdraft. If you apply for one of our arranged overdrafts, we will carry out a check on your personal and financial circumstances, including a full credit check.

We're aware that some people using Apple iOS devices may have an issue accessing the overdraft eligibilty checker. While we work on an update, please use desktop view in your browser to access the checker. 

As an overdraft is a form of credit, it can affect your credit score and report. An overdraft will appear on a credit report as debt, so lenders can see if a customer has an overdraft, as well as the limit and what they are using.

Unless you go beyond your overdraft limit or have payments refused, an arranged overdraft is unlikely to negatively impact your credit score.

Using an arranged overdraft wisely, such as regularly clearing the overdraft and staying in the agreed limit, can even improve your credit rating. Lenders will be able to see you are a reliable borrower. This means you are more likely to be approved for other credit applications. You can read our guide on credit to find out how making full credit repayments on time can improve your credit score.

Regularly going over the overdraft limit will harm your credit rating, as it shows lenders you are struggling financially. Using an unarranged overdraft also signifies to lenders you are struggling to manage your finances, so can damage your credit rating.

If for example you have £100 in your account and need to make a £200 payment, an overdraft allows you to do so. Once the payment is complete, your account balance will be -£100.

However, you will also be charged interest on the amount you have borrowed. With an arranged overdraft there will be an interest-free limit, then you will be charged on the amount borrowed over this limit. If the overdraft is unarranged, you will be charged on the whole amount you borrow.

An overdraft is different to a loan. With an overdraft, you can borrow an amount of money from your bank up to an agreed limit, as and when you need it.

Whereas a loan is a fixed amount of money which is borrowed over an agreed period and repaid with regular repayments.

There are a few ways you can repay an overdraft. Regular repayments into your account can get you out of your overdraft. Also make sure you can make the interest payments.

It’s up to you how much you pay back and when you make a payment. This is so long as you’re on top of managing your overdraft, such as staying within your arranged overdraft limit and making sure there are regular amounts of money coming into your account.

Overdrafts are charged monthly and the amount you pay back depends on how much you’re overdrawn by and the type of current account you have. Also, as interest is charged monthly, the amount you need to repay can change each month, meaning you will be charged interest on top of interest, which can be costly if it is not repaid.

Other options for repaying your overdraft include moving the overdraft to a money transfer credit card.

If you go over your overdraft limit or are in an unarranged overdraft for a prolonged period, this is recorded on your credit report. The bank can also default your account. If you have savings with us, we can also perform a ‘right of offset’, where we reclaim money from your savings to repay unpaid debt.

The overdraft limit is the maximum amount you can borrow from your arranged overdraft account, before going into an unarranged overdraft. For example, if you have agreed with your bank to have an arranged £2,000 overdraft, you can borrow this amount, so your balance will be -£2,000. However, if you borrow more than this amount, this amount is unarranged which can harm your credit score. If you go over your payment limit, this payment can also be refused due to a lack of funds.

You can have an arranged overdraft for as long as you like, if you are able to stay within the limit and the pay the interest charged.