Overdrafts: how to get the help you need
We’re on a mission to help everyone move on up to a better financial future, so we’ve put together this guide about using your overdraft during the coronavirus pandemic. It's updated on a regular basis, so you can have all the latest info in one place.
I have an overdraft — is it okay to use it?
Yes you can use it. But, if you are struggling to pay off your overdraft, there are some new measures in place to help.
Under guidance from the Financial Conduct Authority, banks and lenders can give customers with an arranged overdraft up to £500 interest-free for three months.
If you have an overdraft of more than this amount, only the first £500 is interest-free. If you have less than this amount, for example, £250, you will only get £250 interest-free.
If you want to increase your overdraft limit to £500, you will need to contact your lender to apply for an increase. This means the lender will do some extra checks.
If you’re struggling and need this three interest-free offer, contact your lender as soon as possible. This will not happen automatically, you need to talk to your lender to arrange it.
How much interest will I pay after £500?
This depends on your bank.
But, given the current situation, the FCA have advised that banks and lenders should make sure customers are not worse off after the changes. Visit your lender’s website to check what your new overdraft charges will be.
If you’re likely to borrow a large amount from your overdraft, and need longer to pay it off, you could consider a purchase credit card as a more affordable alternative.
Purchase cards give you a set number of months of interest-free spending, which means you won’t pay interest on anything you buy.Check my eligibility for purchase cards
Keep in mind, some lenders are being cautious with lending right now. If you see something that’s suitable for you, it might be a good idea to see where you stand now, in case things change. Think carefully before applying for credit and choose the right product for your situation.
I’m worried about getting into debt
Debt charity Stepchange offers free help and advice to those struggling. They can guide you through sensitive matters, and have a host of information on their website about debt and coronavirus.
Their phone lines are still open but there are less staff working, so bear this in mind when calling.
Visit the Stepchange website
Citizens Advice is also available to give free and confidential advice. They cover a range of issues, including debt. As well as guides and information online, you can talk to someone online and over the phone, though this may take longer than usual at the moment.
Visit the Citizens Advice website