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14 Jul 2020


Still 24 days to pay day – can your overdraft take the strain?

Pay day may seem like an eternity away, with your bank account put under extra pressure trying to cope with your post Christmas spend and regular household bills. But it is vital that you keep on top of your finances. Going into unauthorised overdraft, buying items without the funds to cover them or having items returned by your bank can be a costly mistake.

Lisa Taylor, analyst at Moneyfacts.co.uk investigates:

Moneyfacts.co.uk research reveals:

  • The average cost of unauthorised debit interest is almost double the cost of an authorised overdraft
  • Average authorised rate is 12.08%, compared with 23.27% for unauthorised borrowing
  • If your banks pays an item for £100 taking you into unauthorised overdraft, bank fees and interest could cost you over £160 if you don’t clear this debt for two weeks.
  • Depending on your current account provider, this charge could vary by over 600%

“Rising bad debts and the impending decision on overdraft charges due from the OFT mean that some borrowers have started to see some radical changes to how their overdrafts and fees are calculated. With the introduction of new fee types, fee tiering and in some cases the replacement of debit interest charges with fees, it’s now an even more varied set of charging structures to get to grips with.

“While some borrowers may have seen reductions, I suspect many more will be facing higher fees this year if they slip into the red or slip into an unauthorised balance. But more worrying is the lack of transparency, comparability and the wide variation in fee amounts.

“Take the example of an item for £100 being presented the your account. Should your bank agree to pay this item and you are unable to bring your account back into the black or within your agreed limit for 14 days, these are the charges you could expect to pay with some of the leading providers:

Provider / Account


Abbey Current Account (Debit Option)


Alliance & Leicester Premier Direct Current


Barclays Bank Account (Option A)


Halifax High Interest Current


HSBC Bank  Bank Account


Lloyds TSB Classic Plus


Nationwide BS Flex Account


Natwest Current Plus


Royal Bank of Scotland IPCA




“This bill could get much larger if you remain outside your limit for longer and if more items are presented and either paid or returned. This could really set your finances back during the first few months of 2008.

“If you are getting close to an agreed limit, don’t bury head in the sand; the problem won’t go away. Visit your bank or pick up the phone and speak to an advisor – it’s got to be better than being hit with a further penalty that you can ill afford.

“It is your responsibility to manage your account, and you must keep a close eye on your balance to avoid paying any unnecessary fees. With access to your account information available through the branch, ATM machines, the internet, telephone and even your TV or mobile there is really no excuse for you not knowing what your current balance is.

“If you explain your position and work through a solution with your bank you could easily avoid being burdened with excessive charges. A permanent extension to your limit may be agreed; otherwise your bank might be able to help with a short-term increase to tide you through January. In some cases you may be asked to pay a small fee to arrange the new temporary facility, but that’s still got to be better than running your account in an unauthorised position, or worse still looking for a pay day loan charging rates anywhere is the region of 1000% plus.

“Using an unauthorised credit facility will also damage your credit score with your current provider, making them less likely to be able to help you in the future should you require any further borrowing facilities.

“If you have already been charged banking fees, and it’s a one off, then ask for a refund; they can only say no.

“For even the most disciplined and conscientious of us, sometimes an unexpected bill may cause us to slip into the red or go over an agreed limit. The best advice is to set up an ‘in case of need’ limit, which can give extra flexibility and additional peace of mind.

“Overdrafts are designed to manage short term cash flow problems, not to fund your day to day living and eventually become hardcore borrowing. If you find yourself permanently living in the red, it’s time to take stock and review your budget, and perhaps look at alternative and cheaper ways to fund this.”


Authorised Overdraft (EAR)

Unauthorised Overdraft (EAR)

Unauthorised Penalty Fee

Paid Referral Fee

Paid Referral Refund


Unpaid Item Fee


Current Account (Debit Option)

10.9% *



£0-£9.99 = £5
£10-£19.99 = £15
£20-£29.99 = £25
£30+ = £35


£50 interest free

£1-£9 = £5
£10-£19 = £15
£20 - £29 = £25
£30+ = £35

Alliance & Leicester
Premier Direct Current

0% *
50p per day (max £5 per month)

£5 per day

£0-£9.99 = £0
£10+ = £25



£0-£9.99 = £0
£10+ = £25

Bank Account

15.6% *



£30 per item
Maximum of 1 per day, 3 per monthly charging period

Refunded if first fee charged in a 12 month period

£25 fee free

£35 per item


High Interest Current
(£1K per month funding)



£28 per month

Maximum 3 per day



£35 (max 3 per day)

Bank Account



£25 arrangement / review fee
(£25 per subsequent overdraft request)

Free if first agreed overdraft request (formal or informal) in any six-month period or is less than £10. Fees will not exceed the amount you are overdrawn by in a charging month.

£10 fee free buffer

Up to £9 = £0
£10 - £24 = £10
£25+ = £25

Lloyds TSB
Classic Plus



£15 per month. Plus daily charge:
Less than £25 = £6 per day,
£25 - £100 = £15 per day, £100+ = £20 per day. Max 10 daily charges per month



(Max 3 per day)

Nationwide BS
Flex Account



£20 per month

£21.50 per item


£30 fee free



Current Plus

Tiered Rates:
£1 – 19.99%
£1K – 19.41%
£5K – 17.37%


£28 per month

£30 per item, Max £90 per charging period


£100 interest free

(Max 3 per day)

Royal Bank of Scotland

Tiered Rates:
£1 – 19.95%
£1K – 19.05%
£5K – 17.05%


£28 per month

£30 per item
Max £90 per month


£100 interest free

(Max 3 per day)

































* Introductory offer / switcher deal may apply

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry. 




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