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Accurate as of Friday, 06 December 2024
Student 16-25 Railcard
Santander Edge Student current account
Switch Incentive
Arranged overdraft
Yes (subject to eligibility)
Account fees
None
Rewards and other perks
Get cashback, vouchers, prize draws and other personalised offers
5% interest on balances up to £500
Student Account
Switch Incentive
Arranged overdraft
Yes (subject to eligibility)
Account fees
None
Rewards and other perks
Receive 5% AER/4.89% gross variable
£150 to switch
Everyday Current Account
Switch Incentive
£150 to switch
Arranged overdraft
Yes (subject to eligibility)
Account fees
None
Rewards and other perks
Get cashback, vouchers, prize draws and other personalised offers
This is a preview of the top three current accounts sorted by overdraft. For a full breakdown of all our current accounts, including alternative current account types, progress to the results table.
An overdraft is a way of borrowing from your bank to spend more than you have in your current account. They can be useful to manage your finances, but could also prove expensive if used poorly.
You’ll go into your overdraft if you make a purchase or withdraw cash that takes you ‘below zero’ or in debit on the account. Depending on the type of current account you have, you may have to pay interest on the overdraft.
Some student current accounts come with an interest-free overdraft for several years, for example.
Interest-free: Interest-free overdrafts work like an interest-free loan, and you won’t face any charges for this borrowing. Some accounts offer an interest-free buffer on an agreed overdraft, usually up to £250, before implementing interest charges. Others, such as student or graduate bank accounts, might offer an interest-free agreed overdraft of up to £2,000
Agreed interest: If you’ve exhausted your bank balance and interest-free buffer (if you have one), your bank is likely to start charging you for using your overdraft at a set interest rate. In most cases, it will be interest charged on the amount you’ve borrowed over your interest-free limit.
This account allows you to spend more than your available balance by offering an arranged overdraft limit.
You may be charged interest on the amount you overdraw, depending on your account's terms and the overdraft limit.
Some accounts offer a fee-free overdraft buffer, allowing you to overdraw a small amount without incurring charges.
You can typically repay the overdraft at any time, and funds deposited into your account will automatically reduce the overdrawn amount.
Setting up an overdraft usually involves a credit check, as the bank assesses your ability to manage borrowing.
Your bank sets a maximum limit for how much you can borrow, and exceeding this limit could lead to additional charges.
Overdrafts are fairly simple to understand. The key points are as follows:
Banks can only charge you an annual interest rate for both unarranged and arranged overdrafts, meaning you won't pay any additional fees or overdraft charges
But interest rates on overdrafts from banks and building societies can be high, ranging from 19% to 40% or more
Entering an unarranged overdraft can negatively impact your credit score. So if you're looking to borrow money, apply for an arranged overdraft
If you don’t repay what you owe on time, you run the risk of damaging your credit score or building up significant debts
For student current accounts your overdraft is likely to be interest-free and you’ll be expected to pay it back within two to three years of graduating
1) Authorised overdraft: An authorised (or arranged) overdraft is arranged with your bank, and usually comes with an agreed borrowing limit – this can be anywhere from £250 to £3,000. There may be a small arrangement fee.
2) Unauthorised overdrafts: An unauthorised overdraft (or unarranged overdraft) is borrowing you haven’t agreed with your bank. You’ll go into an unauthorised overdraft if you go over your authorised overdraft limit or if you overspend when you don’t have an agreed overdraft with the bank.
Flexibility: Unlike a loan, where you’ll borrow a set amount and repay over a fixed period, an overdraft gives you a way to borrow the exact amount you need immediately and repay when it suits you. It can also act as a handy financial safety net.
No early repayment charge: You shouldn’t be charged a fee for paying back any amount of your overdraft at any time
Quick to apply for: There’ll be less paperwork than applying for a loan – often you’ll get an overdraft automatically with your current account application
Less money to borrow: The amount of money you can access through your overdraft tends to be lower than with a personal loan
Interest charges: The interest charged on overdrafts can be high, which can make it an expensive way to borrow long term
Over-spending: Spending is coming out of your current account so if you don't keep an eye on your debit card use you could end up with a large overdraft that's hard to pay off (most banks will send text alerts if you're close to your overdraft limit)
Here's how to choose the best account for you
Look for accounts with the lowest interest rates and fees on overdrafts. Also, check for any fee-free overdraft buffers that could save you money.
Review customer service ratings and ensure the account management options, such as mobile apps or online banking, match your preferences.
Consider any switching perks, like cash bonuses, but be cautious of any ongoing monthly fees that could offset these incentives.
Switching your overdraft current account is similar to switching a regular account, but there are a few extra considerations if you're overdrawn. Here’s what to expect:
Starting the switch: Check if your new bank is part of the Current Account Switch Service. If you’re in your overdraft, confirm whether your new provider will accept the existing overdraft balance before starting the switch.
Your new account is set up: Seven working days before your switch date, your new provider will start setting up your account. During this time, avoid setting up new payments.
Dealing with your overdraft: If you're overdrawn, you may need to repay your old bank or arrange a new overdraft with your new provider. Ensure you understand the terms to avoid disruptions.
Switching your overdraft current account can offer several advantages, including:
Lower overdraft fees: By switching, you may find a provider that offers lower fees or more competitive interest rates on your overdraft, saving you money.
Interest-free overdraft: Some banks offer an interest-free overdraft for a limited period when you switch, giving you a chance to clear or reduce your balance without extra charges.
Better overdraft terms: Switching accounts could give you access to more flexible overdraft limits or repayment terms, helping you manage your finances more easily.
Cash incentives: Many banks provide cash bonuses for switching, which can be a useful perk, especially if you’re managing an overdraft.
Take a deep dive through your finances and think about what you could cut back on before you go overdrawn
Arrange a text alert with your bank when your balance drops below a certain amount. This can warn you you’re approaching your overdraft
If you’re aware you could enter into your unauthorised overdraft let your bank know. They might be able to extend your existing limit
Consider setting up and regularly topping up an easy access savings account which could be used to clear an overdraft in an emergency situation
Using your overdraft could affect your credit rating and eligibility for other forms of credit because lenders look at any outstanding debts when making lending decisions.
Your credit score is more likely to be negatively affected if you use an unauthorised overdraft or go beyond your agreed overdraft limit because lenders are likely to see you as managing credit poorly.
If you have an arranged overdraft but don’t use it (or use it occasionally but clear it quickly) this shouldn’t affect your credit score.
Opening a bank account in the UK that will provide you with an overdraft is quick and easy, although you will have to pass a few financial checks.
1) Make sure you’re eligible: You’ll need to be aged 18 or over and a UK resident. There could be other requirements depending on the individual account you choose.
2) Submit your application: You should be able to apply online, but may also be able to apply in-branch as well.
3) Await approval: A credit check is required, which usually gets processed quickly but can vary by account.
4) Activate your account: Once approved, you’ll be told your fee-free overdraft limit and can begin using the bank account.
A credit card can offer more flexibility than an overdraft, especially with 0% interest introductory offers on purchases or balance transfers, giving you a cost-effective way to borrow short-term.
If you need to borrow a larger amount over a longer period, a personal loan may be a better choice. You’ll repay in fixed monthly instalments, often with lower interest rates than overdrafts.
Credit unions offer small, affordable loans with lower interest rates than many banks, making them a good option for managing unexpected expenses.
Having an overdraft option on your account can give you real peace of mind that you’ll have instant access to additional money if you need funds in a hurry to cover an emergency expense, such as a new washing machine or car repairs. What’s more, you only pay interest on what you use. However, it’s important you do everything you can to pay off what you owe as soon as possible and don’t fall into the trap of being overdrawn permanently.
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We can make it easy to find an account that suits you by comparing a range of options all in one place.
Click through to search the market to find the best current account for your needs, including any cash incentives to switch
Use our handy filters to narrow down your options based on the type of current account you need, such as high interest or student accounts
When you find the deal you want, click straight through to the provider to complete your application. Sit back while your new bank takes care of the switch
Use your savings: If you have money set aside in a savings account it could make better sense financially to use some of it to clear your overdraft, particularly if you’re paying high interest on your borrowing
Transfer the balance: If your interest rate is high, you could use a money-transfer credit card to clear the debt built up in your overdraft. You may get a 0% interest period for 18 months in some instances
Switch providers: If you switch to a new bank, you could be offered an interest-free period on your overdraft for a set amount of time. This could help you avoid interest building up while you’re paying off your overdraft balance
Take out a loan: A low-rate personal loan could make paying off your overdraft more affordable, especially if the loan comes with a low-interest rate
You may be able to switch banks if you’re currently overdrawn, but your existing overdraft will need to be agreed with your proposed new bank or building society before the switch. If your new bank won’t offer you an overdraft up to the amount you are already overdrawn, you’ll have to repay what you owe before switching.
An overdraft should only be seen as a way of managing your finances in the short term. If this is the case and you need more money than you currently have in your current account, then it might be right for you. It’s easier and quicker to set up an overdraft than a loan or credit card and by definition you’ll only borrow the exact amount you need. However, always make sure it is authorised by your bank first and understand the interest charges you face, as they can be more expensive than other ways of borrowing.
To open a bank account, you’ll usually need the following information to hand:
Personal information: Usually your full name, nationality, contact details, date of birth and national insurance number
Proof of address: A recent utility bill, mortgage statement or tenancy agreement, bank statement or council tax bill
Proof of identity: Such as your passport or driving licence. If you’re opening a children’s account or student account, your bank may accept a birth certificate as proof of identity
Whether you can get an interest-free overdraft will depend on your bank or building society and their view of you as a customer. For example, students are often given interest-free overdrafts as an incentive to sign up as new customers when they are young.
Customers with a better credit score are more likely to be offered an interest-free overdraft too because they are seen as a lower risk of not repaying what they owe. It’s worth noting that because all interest-free overdrafts are given at the account provider’s discretion, they can also remove them at short notice. The bank should always give you warning and a chance to repay what you owe, but it’s another reason why overdrafts shouldn’t be seen as a way of long term borrowing.
It’s a good idea to check your account statements regularly, because this could stop you going into your overdraft without knowing. It can also be a good way to double check whether there are any transactions you don’t recognise.
Look for a provider with good customer service, because you never know when you’ll need to call them up or go into a branch to fix an issue.
Remember to be careful with your PIN and account details; you should keep this information safe and protected. Remember, your bank will never ask you to reveal details like your PIN, either on the phone, in person or through an email.
Your bank will almost certainly have an app that lets you manage your account online, and some may even be based on their app. This is excellent for quick and easy money management.
Each bank has different ways of transferring money. Some require you to use a card reader when transferring any sum of money, while others only use it for transactions over a set amount.
Other banks do not use card readers at all, so if money transfers are something you might be doing a lot of, it’s worth checking the policy details to see how easy it is to make payments on the go.
If your current account comes with benefits such as air miles, you might want to check whether you really need them. For example, if you’re not a frequent flyer, is an air miles bonus worth the extra cost of the monthly fee? The same goes for any other attached benefits such as travel insurance.
