What happens if I go into unarranged overdraft UK?

Banks can no longer charge higher rates for unarranged overdrafts (since 2020 rule changes), but they may refuse payments, potentially causing fees from the payee. Your credit file shows you've exceeded limits, and the bank may reduce or remove your overdraft facility.

Can a bank charge me for going over my overdraft limit?

Banks charge the same rate for arranged and unarranged overdrafts (typically 35-40% APR). They can't charge daily fees for unarranged borrowing anymore. However, refused payment fees (from unpaid direct debits) may still apply from the companies you owe.

Does going over your overdraft affect credit score UK?

Yes — regularly exceeding your overdraft signals financial stress to credit agencies. It can lower your score, especially if payments are missed because of insufficient funds. Lenders see this as a risk indicator when you apply for credit.

What should I do if I've gone over my overdraft?

Act immediately: check your balance, cancel non-essential spending, contact your bank about increasing your limit or a payment plan, consider whether a loan would reduce costs, and get free debt advice if this is ongoing.

What Happens If You Go Over Your Overdraft UK — Fees and Consequences | PocketWise

What Happens If You Go Over Your Overdraft UK — Fees and Consequences

Consequences of exceeding your overdraft limit. Charges, credit impact, and what to do if you can't stay within your arranged overdraft.

By PocketWise · 23 March 2026 · 4 min read

Going over your overdraft triggers various consequences. Here’s what actually happens and what to do about it.

Current Overdraft Rules

2020 Rule Changes

Before 2020	After 2020
Higher unarranged rates	Same rate for all overdrafts
Daily fees common	Daily fees banned
Complex charging	Single interest rate
Separate limits	Clearer structure

How Banks Charge Now

Element	Current Rules
Interest rate	Single rate (typically 35-40% APR)
Same rate	Arranged and unarranged
No daily fees	For unarranged
Refused payments	May incur charges

What Happens

If You Exceed Your Limit

Consequence	Details
Interest charged	On full overdrawn amount
Potential payment refusal	Bank may bounce payments
Credit file impact	Shows exceeded limit
Bank contact	They may call/write
Overdraft review	May reduce your limit

Payment Refusals

Scenario	What Happens
Direct debit refused	Payee not paid
Standing order fails	Recipient not paid
Card declined	Transaction blocked
Cheque bounced	Returned unpaid

Knock-On Effects

Refused Payment	Consequence
Mortgage	Arrears marked
Utility bills	May charge you
Council tax	Enforcement risk
Insurance	Policy may lapse
Credit card	Late payment fee

Bank Actions

Immediate Response

Action	Bank May…
Honour payment anyway	Use internal discretion
Refuse payment	Return unpaid
Contact you	Alert to situation
Offer increase	If eligible

Longer Term

If Pattern Continues	Bank May…
Reduce overdraft	Lower your limit
Remove overdraft	Take it away
Call in debt	Demand repayment
Close account	In extreme cases

Credit Score Impact

What’s Recorded

Information	On Credit File
Overdraft utilisation	How much you use
Exceeded limits	Shows to lenders
Missed payments	If payments fail
Account status	Satisfactory or not

Impact Level

Situation	Credit Impact
Occasional slight exceeding	Minor
Regular exceeding	Moderate
Frequently over	Significant
Payments bouncing	Severe

What to Do Immediately

Step 1: Check Position

Action	Why
Log into banking	See exact position
Check pending	What’s due out
Calculate shortfall	Know the gap
Review week ahead	Upcoming expenses

Step 2: Stop the Bleed

Action	Details
Pause subscriptions	If possible
Cancel non-essentials	Immediately
Delay spending	If you can
Use cash	Avoid card for a few days

Step 3: Contact Bank

Request	Possibility
Overdraft increase	If eligible, good history
Temporary extension	For specific period
Payment plan	If in difficulty
Fee waiver	If first occurrence

Getting Help

If You’re Struggling

Action	Resource
Free debt advice	StepChange, National Debtline
Benefit check	Turn2us, Citizens Advice
Bank support	Hardship teams
Breathing space	60-day protection

Breathing Space Scheme

Feature	Details
Duration	60 days
Effect	Creditors can’t contact
Interest	Still accrues
How to get	Through debt advisor

Alternatives to Overdraft

If Overdraft Is Expensive

Option	Typical Rate
0% money transfer card	0% for period
Personal loan	7-15% APR
Credit union	Lower rates
Overdraft	35-40% APR

Breaking the Cycle

Step	Action
1	Calculate actual shortfall
2	Consider low-cost alternatives
3	Set up budget
4	Build buffer gradually

Cost of Overdrafts

Interest Example

Overdrawn Amount	Monthly Interest (39.9% APR)
£100	~£3.30
£500	~£16.50
£1,000	~£33.00
£2,000	~£66.00

Vs Other Borrowing

Product	Representative APR
Overdraft	35-40%
Credit card	19-29%
Personal loan	7-15%
Credit union	12-42%

Why People Stay In Overdraft

Reason	Reality
Feels like my money	It’s borrowed money
Convenient	But expensive
Always been there	Doesn’t mean it’s good
Scary to address	Gets worse over time

Budget to Clear Overdraft

Example Plan

Starting Position	£1,000 overdrawn
Income	£2,000/month
Essential bills	£1,500/month
Available	£500/month
Time to clear	2 months

Clearing Strategy

Month	Overdraft	Interest	Payment
1	£1,000	£33	£500
2	£533	£18	£500
3	£51	£2	£53
Cleared			Month 3

Then Build Buffer

After Clearing	Action
Keep saving	Same £500
Build emergency fund	1 month buffer
Reduce overdraft limit	Gradually
Eventually remove	When confident

Preventing Future Issues

Set Up Alerts

Alert Type	Trigger
Balance alerts	Below certain level
Large transaction	Over set amount
Weekly summary	Regular updates
Approaching limit	Overdraft warning

Emergency Planning

Buffer	Why
£1,000 minimum	Cover unexpected
Separate account	Don’t spend it
Easy access	But not too easy
Top up	When used

Summary

Key Point	Details
Same rate now	Arranged and unarranged
No daily fees	Since 2020
Credit impact	Yes, if pattern
Act quickly	Don’t ignore
Get help	If struggling

If You Exceed	Steps
1	Check position
2	Stop spending
3	Contact bank
4	Plan to clear
5	Build buffer