Cheap and free overdrafts: best current accounts for those who go overdrawn

Cheap and free overdrafts: best current accounts for those who go overdrawn

Some banks offer cheap or even free overdrafts with their current accounts. Here's how to avoid costly interest and charges on your bank account debt.

lovemoney staff

Banking and Borrowing

lovemoney staff
Updated on 21 September 2023

If you regularly find yourself dipping into the red with your current account, you need to ensure you avoid costly interest charges.

A number of banks offer cheap or even free arranged overdrafts, provided you only go overdrawn by a couple of hundred pounds.

Heavily in debt? Here are the cheapest ways to pay off what you owe.

Best bank accounts for free overdrafts

Below is a list of accounts that offer an interest-free overdraft.

You should arrange an overdraft when you first set up the account. In some cases, you'll need to use the Current Account Switch Service to be eligible for the fee-free overdraft.

As a final point, these accounts are by no means an answer to persistent debt problems.

If you find yourself constantly in the red and struggling to keep your head above water, it's time to get free debt help.

We've arranged this table first by the duration of the free overdraft and then by the free overdraft limit.

Bank Account

Duration of free overdraft (months)

Assumed free overdraft limit

Cost if you exceed the limit (arranged overdraft)

first direct 1st Account



39.9% EAR

TSB Spend & Save Plus*



39.9% EAR

          Club Lloyds**



27.5% EAR

Nationwide FlexDirect



39.9% EAR

Santander Everyday current account***



  39.94% EAR

Santander Edge current account***+



   39.94% EAR

Santander Edge Up current account***^



    39.94% EAR

*This account costs £3 a month.
**If you pay in less than £2,000 a month, you’ll get charged £3 a month. 
***You'll need to use the Current Account Switch Service to switch to this account.
+The Santander Edge account has a £3 monthly fee.
^The Santander Edge Up has a £5 monthly fee.

First direct 1st Account

First direct offers an ongoing £250 fee-free arranged overdraft, which should be enough to deal with the odd, unexpected bill.

Beyond that point, its overdraft charges are pretty hefty at 39.9% although first direct's customer service is consistently rated as excellent.

First direct’s account is free and you'll also have access to a 7% Regular Saver account (this rate is fixed for 12 months), plus you can get £175 if you switch.

TSB Spend & Save Plus

TSB's Spend & Save Plus account offers an interest-free overdraft of £100, but if you exceed this, you’ll get hit with high overdraft charges at 39.9%.

While the account will set you back £3 a month, you can also earn £5 cashback every month if you make 20 payments with your debit card, plus you won’t get charged for using your card abroad.

Lloyds Bank Club Lloyds

The Club Lloyds current account has a fee-free arranged overdraft of £50 with a typical interest rate of 27.5% for over this amount.

The account comes with many perks like in-credit interest of 1.5% on balances between £1 and £3,999.99 and 3% for balances between £4,000 and £5,000, but you’ll need to pay out two separate Direct Debits every month.

You can also choose one lifestyle benefit like six free cinema tickets, an annual magazine subscription, an annual Gourmet Society or Coffee Club membership or 12 months of Disney+.

You will need to pay in at least £2,000 each month in order to avoid a £3 monthly fee.

It's worth noting that the £50 interest-free overdraft is available with other Lloyds accounts, but some of these have a higher monthly fee.

Nationwide FlexDirect account

Nationwide FlexDirect

If you've got a good credit rating but know you've got a tumultuous year coming up, then Nationwide's FlexDirect account could be a good option.

That's because it provides a 12-month fee-free arranged overdraft.

The credit limit you'll get depends on your status but could be higher (they give an example of £1,200) than the ongoing fee-free overdraft accounts discussed above.

However, you'll need to know that you can pay off your overdraft by the end of the 12-month period – otherwise, be prepared to pay a high 39.9% interest.

This account is free and offers 5% interest on balances of up to £1,500 for the first 12 months (1% variable after) although you'll have to pay in at least £1,000 a month into the account. 

If you know you are likely to need to borrow money, then a 0% purchase card could give you far longer to pay off your debts.

Santander Edge Up, Edge and Everyday accounts

All these accounts offer a fee-free arranged overdraft for four months – after this point, you’ll pay a high interest rate of 39.94%.

The Santander Edge Up current account pays 1% cashback on certain household bills (up to £15 per month). You'll also earn up to 1% cashback at supermarkets and on travel costs (again capped at £15 per month). This means the maximum you can earn is £30 per month.

The Santander Edge account pays 1% cashback (up to £10 a month) on selected household bills when you pay by Direct Debit.

You also get 1% cashback (up to £10 a month) at supermarkets and on travel costs when you use your debit card.

On top of this, Edge account holders can apply for a savings account offering 7% interest on balances of up to £4,000, which includes a 2.5% variable bonus rate for the first 12 months. Note, the linked savings account isn't available for Edge Up customers.

The bank gives an example of £1,200 for its overdraft, but it may be less, depending on your credit rating. But you'll need to use the Current Account Switch Service to move your banking to Santander.

For the Edge Up, you must pay in a minimum of £1,500 a month and set up at least two Direct Debits. The monthly fee is £5, and the amount of interest is 3.5% on balances of up to £25,000.

For the Edge account, you must also pay in at least £500 a month and set up two Direct Debits. The monthly fee is £3. 

The Everyday account is free.

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 interest.

For some top tips, read our guide to getting rid of your overdraft for good.

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 article contains affiliate links, which means we may receive a commission on any sales of products or services we write about. This article was written completely independently.

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