How do overdrafts work?

An overdraft is a credit/borrowing facility, which allows you to use your current account to make payments or withdraw cash even when your balance falls below zero. 

Use our eligibility checker to find the likelihood of being able to get a certain overdraft with your first direct account.

An arranged overdraft is where your bank or lender agrees an overdraft limit with you. This will allow you to make payments or withdrawals up to that limit. 

Your bank or lender will usually charge you interest for using an arranged overdraft. In some cases there may be an interest-free buffer, meaning you can borrow up to an agreed amount without being charged interest. However, not all overdrafts come with this service, so it's always best to check with your lender to avoid incurring unexpected charges. 

If you haven’t agreed an overdraft limit with your bank, but you still spend more than what’s in your current account, you’ll be in an unarranged overdraft.

You’ll also be in an unarranged overdraft if you go over your arranged overdraft limit.

If you’re with first direct, we’ll consider an unarranged request and make the payment if we can (subject to your use of your account and credit status). But using an unarranged overdraft could mean your transactions are declined.

We report account activity, including overdraft usage to credit reference agencies. An unarranged overdraft lasting more than 30 days could have a negative impact on your credit rating.

Each current account will set a monthly maximum charge for:

• going overdrawn when you have not arranged an overdraft; or
• going over/past your arranged overdraft limit (if you have one).

This cap covers any:

• interest and fees for going over/past your arranged overdraft limit;
• fees for each payment your bank allows despite lack of funds; and
• fees for each payment your bank refuses due to lack of funds.

The monthly cap on unarranged overdraft charges for the 1st Account is £20.

You may be charged interest for using your overdraft. Before using your overdraft, always check what the interest rates are and make sure you can afford to repay what you borrow. 

Text alerts

If we've got your mobile number, first direct will send you a text message if you're about to go into your overdraft, or if we can see that you're about to go into it. These alerts are designed to help you manage your overdraft usage and avoid being charged interest. 

We'll send you an alert for both arranged and unarranged overdraft usage.  This is a service offered by most banks, and you can opt-out of these alerts if you prefer. 

Check your overdraft costs

Use our Overdraft Cost Calculator to see the potential costs of using a first direct overdraft.

You can cancel your arranged overdraft at any time, provided you repay the overdraft balance owing including any interest.

If you're not making use of your full overdraft limit and you'd like to reduce it, you can do this too. 

If you’re a first direct customer and want to cancel your arranged overdraft or reduce your overdraft limit, please call us on 03 456 100 100.

There are a few things you can do to help reduce how much of your overdraft you’re using or to pay it off completely:

• create a monthly budget to keep track of where your money is going
• look at your spending to see where you could potentially make changes
• set yourself a repayment plan
• seek help if you need it

Read our tips on how to get out of your overdraft.

If you can’t pay back what you’ve borrowed, get in touch with your bank as early as possible, as they may be able to help.

As overdrafts are repayable at any time, your bank could ask you to repay it, so it’s crucial not to become reliant on it. Continually using your overdraft may mean you face significant interest charges, which can make it harder to repay the debt. 

If you need support with managing the overdraft on your first direct account, call us on 03 456 100 188. We have a dedicated Financial Support team who are here to help.

We’re here Mon to Fri 8am to 6pm and Sat 8am to 4pm.