What is an overdraft?

What is an overdraft?

An overdraft allows you to withdraw more money from your bank account than you actually have. It involves an agreement with your bank which lets you use an overdraft facility for an agreed amount, and usually the bank charges you for the period you use it. The money borrowed needs to be paid back and it’s recommended by financial experts to use an overdraft for an emergency only. If you don’t have an authorised/agreed overdraft and go overdrawn, you are likely to be hit with some substantial fines. Some banks may allow you to rectify this if you let them know about it as soon as possible.

Does an overdraft affect my credit score?

An overdraft is seen as a credit facility and your ability to borrow and repay the money you owe as agreed may help you improve your credit score. If however you fail to make repayments this could have a negative impact on your score.

Why do people go overdrawn?

There are various reasons people go overdrawn. Simply forgetting about a payment due or not knowing how to balance outgoings for a particular month can all escalate into more serious financial difficulties. Generally, planning ahead is key to staying in the black.


credEcard’s money management envelope facility can help you budget ahead and ensure you never forget an important payment or bill ever again!

What to do if you are worried about your salary being sucked into an unauthorised overdraft?

If you have used an unauthorised overdraft and want to use an alternative account to receive your salary, benefits or loans. Some people use the credEcardplus personal online account as an alternative to a basic bank account to receive money. There is no overdraft facility and if you apply for an account it does not affect your credit score.



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