# What are overdraft charges?

> Quick answer · Last updated 23 June 2026

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## In short

Since April 2020, banks must price arranged overdrafts with a single annual interest rate (APR) instead of daily or monthly fees. Unarranged overdraft charges are banned, but arranged overdraft interest can still be expensive.

An overdraft lets you spend more than the balance in your current account, up to an agreed limit. Before April 2020, many banks charged fixed daily or monthly fees plus interest, which made the true cost hard to compare. FCA rules now require a simple annual interest rate on arranged overdrafts.

Unarranged (unplanned) overdrafts — where you go over your limit or have no agreed facility — can no longer include charges for unpaid items or for going into an unarranged overdraft. Banks may still charge interest on the amount you borrow without permission, but the blanket daily fees that used to apply have gone.

Arranged overdraft APRs are often higher than many credit cards or personal loans, so an overdraft is usually best treated as short-term borrowing. If you rely on one regularly, ask your bank about a lower-cost option, check whether a 0% credit card or budgeting support would help, and use free debt advice if the balance keeps growing.

Your bank must send a notice before charging overdraft interest on an unarranged overdraft, giving you a chance to pay in and avoid the charge. Always check your account terms for the current APR and any buffer limits.

## Related

- [Banking guide](https://moneyguide.org.uk/banking/)
- [How long does switching banks take?](https://moneyguide.org.uk/answers/how-long-does-it-take-to-switch-bank-accounts/)

## Primary source

gov.uk/overdrafts-charges

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.