Five places where you can get an overdraft for free
As the interest charged on overdrafts hits a new record high, we point out five places where going into the red is absolutely free.
Research this year from M&S Bank found that a third of us use an overdraft on our current account. Sadly, interest rates charged on authorised overdrafts can be really significant.
If you have to be overdrawn, you’ll want to pay as little for your debt as possible. You can keep the costs low by taking advantage of an interest-free deal. If you’re prepared to switch your current account, here are five accounts which will allow you to do just that (albeit only for a short time in some cases):
1) Santander 123 current account
You can have an interest-free arranged overdraft for four months with the Santander 123 account. The bank gives an example of £1,200, but it may be less, depending on your credit rating.
2) Santander Everyday current account
Santander's Everyday current account also offers a four-month interest-free overdraft period when you switch to it using the bank's dedicated switching service. Again, it gives an assumed overdraft amount of £1,200, but this may be less. There's no fee to run the account but no additional perks either.
3) First Direct 1st account
Another way you can dodge overdraft fees is to choose a current account with a free overdraft buffer. This will only work if you go into the red by a relatively small amount.
If you can pay in at least £1,000 a month, try the First Direct 1st Account which offers a £250 interest-free buffer. You do explicitly have tp request this buffer, though.
You'll also get £125 for switching if you're a new customer.
4) The Co-operative Bank Current Account Plus
Alternatively, the Co-operative Bank Current Account Plus has a £200 interest-free buffer as long as you can pay in at least £800 a month.
5) Nationwide FlexDirect
The FlexDirect account from Nationwide is a stonking current account, paying a market-leading 5% interest on your balances up to £2,500. It also offers a 12-month fee-free overdraft, subject to your circumstances.
You will need to pay in £1,000 each month though.
Paying off your overdraft
If you only have a limited interest-free arranged overdraft period, like those offered by the Santander accounts, you'll need to have a plan in place to pay it off or you'll start being charged daily fees. For some top tips, read Three ways to get rid of your overdraft for good!
Avoid going into an unauthorised overdraft at all costs, as you'll soon rack up high charges and daily fees. If you're struggling with your debts, there are plenty of places to get free, expert, confidential debt advice – we've listed them in Where to get free debt advice.
This is a classic Lovemoney article that is regularly updated