What is an overdraft?

Helping you understand overdrafts

What is an overdraft?

An overdraft lets you borrow extra money through your current account. For example, if you have no money left in your account and you spend £30, your balance would be -£30. This means you’re using an overdraft.

An overdraft is a form of debt and is repayable on demand. Always make sure you have enough money in your current account, or a suitable arranged overdraft limit in place before any payments are due to come out of your account.

Usually, you’ll agree an overdraft limit with your bank or lender – this is known as an arranged overdraft.

How do overdrafts work?

There are two types of overdraft: arranged and unarranged.

  • An arranged overdraft is when we agree to a limit that lets you spend a bit more money than you have in your current account. This could help you manage your money if you have to cover short-term expenses such as an unexpected bill.
  • An unarranged overdraft is when you spend more money than you have and you haven’t previously arranged an overdraft limit with us, or you have exceeded your existing overdraft limit.

It's important to remember that both types of overdraft have associated charges but you'll only pay interest if you use it. This interest charge is dependent on your account and you can read full details of this when you apply for an overdraft.

How much does my overdraft cost in pounds and pence?

Here we can show you an example of the interest cost when you use a £500 arranged overdraft.

How does our overdraft compare?

A good way to compare the costs of borrowing products is by using the APR, which shows the cost of borrowing over a year.

Tools to help you out

See if you'll be accepted before you apply

Have a shot of our eligibility checker tool, which will help you understand if you’ll be accepted for an overdraft before you start an application. It only takes a couple of minutes and it won’t harm your credit rating.

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Find out how much you'll pay in interest

Our cost calculator tool allows you to see how much interest you’ll pay based on how much you plan to borrow, and how regularly you want to use it.

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Ready to set up an overdraft?

Already have a current account with us?

You can apply for an arranged overdraft online if you are registered for Digital Banking. Take a look at the overdraft available to you and decide if it's right for your needs.

Available to eligible Royal Bank of Scotland current account customers, UK residents aged 18 or over. Subject to lending criteria.

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New to Royal Bank of Scotland?

You'll need a current account with us before you can apply for an arranged overdraft. Start by exploring our current account range and how you could switch.

Account eligibility and criteria apply.

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Step-by-step guide to applying online

Help to stay in control of your spending

Mobile banking app

Our mobile banking app helps you keep track of your spending on the go. Keep an eye on money coming in and out of your account.

App criteria apply.

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Free text alerts

You can set up free text alerts and get notifications when your balance goes above or below a certain limit. We can also let you know if you're about to slip into an unarranged overdraft.

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Overdraft, credit card or loan?

If you're unsure which type of borrowing to use, we'll walk you through your options to help you decide what's right for you.

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Something else we can help you with?