Cut interest rates to 0%
Borrowing money using your overdraft can be the most expensive option, with most banks charging around 40% in interest. However there are a few accounts which offer lower rates – potentially 0%.
So if you ever go below zero on your bank balance, these are the current accounts to consider.
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Best 0% overdrafts
The best way to lower the cost of your debt is to get it down to 0%. Sadly few accounts offer sizeable interest free overdrafts.
If you can’t get this account you could consider a money transfer credit card, which will move the agreed credit limit to your bank account.
First Direct 1st account overdraft: £250 at 0%
The £250 0% buffer is a useful feature for anyone who occasionally goes overdrawn by a small amount.
The account also regularly runs switching deals, so moving your banking over could make you money to help clear some of your overdraft.
| Overdraft interest rate | 0% EAR on first £250 (subject to status) |
| 39.9% EAR if you borrow more than £250 | |
| Fee | None |
| Requirements | None |
| Notes | Shared FSCS protection with HSBC |
Nationwide FlexDirect overdraft: £50 at 0%
This account used to have the largest 0% overdraft for the first year – although how much you got depended on a credit check.
But from November, it’s replacing it with a £50 interest free buffer.
The introductory overdraft offer on FlexDirect will be withdrawn for new account openings and replaced by cashback. There will be no change for existing FlexDirect customers already benefiting from an existing offer.
| Overdraft rate | 0% EAR on first £50 |
| 39.9% EAR above set rate | |
| Fee | None |
| Multiple accounts? | Two – one personal and one joint |
| Notes | You can only have the account once |
TSB Spend & Save Plus account overdraft: £100 at 0%
I’m not a huge fan of the TSB Spend & Save Plus account as though you can earn a £5 reward each month by using your debit card 20 times, much of that is wiped out by a £3 monthly fee.
However, the £100 buffer might be handy if you ocassionally go into the red.
The account also sometimes runs switching deals, which could help you clear some of your overdraft.
| Overdraft interest rate | 0% EAR on first £100 |
| 39.9% EAR if you borrow more than £100 | |
| Fee | £3 a month |
| Requirements | Various to trigger £5 monthly reward |
Barclays Premier account overdraft: £500 at 0%
This account is a hard one to get – you need a massive salary and savings to be eligible. However if that’s you and you tend to go slightly overdrawn from time to time, this interest-free buffer could be handy.
| Overdraft interest rate | 0% EAR on first £500 |
| 35% EAR if you borrow more than £500 | |
| Fee | None |
| Requirements | Salary of £75,000 a year or £100,000 invested with Barclays |
Best low rate overdrafts
If you can’t get an interest-free overdraft or find an alternative way to lower your debts, then it’s possible to get less than 40% interest with some banks. However, they’re still expensive and there’s no guarantee you’ll get their lower rates.
Starling Bank overdraft: 15%, 25% or 35%
The cheapest alternative to a 0% overdraft is potentially with Starling Bank. When you apply they may offer you either 15%, 25% or 35%. All are lower that what you’d get elsewhere, but that’s still not a reason to go overdrawn if you can avoid it.
| Overdraft interest rate | 15%, 25% or 35% EAR up to £5,000 |
| Fee | None |
| Requirements | None |
| Notes | Digital-only bank |
Monzo overdraft: 19%, 29% or 39%
Not as good as Starling’s offering, and there’s a chance you’ll get the super high 39%, but worth looking at if you really need to.
Again, you can check what you’ll get when you apply. A hard search is only made on your credit file if you choose to go for the overdraft.
| Overdraft interest rate | 19%, 29% or 39% EAR up to £3,000 |
| Fee | None |
| Requirements | None |
| Notes | Digital-only bank |
Other bank overdraft rates
To give you an idea of what you could be getting charged, here are the core overdraft interest rates by the leading high street banks. There’s a chance rates could vary by different current accounts offered by each bank.
| Bank of Scotland | 19.9%, 29.9%, 39.9% or 49.9% |
| Barclays | 35% |
| Co-operative Bank | 35.9% |
| Halifax | 19.9%, 29.9%, 39.9% or 49.9% |
| HSBC | 39.9% |
| Lloyds | 19.9%, 29.9%, 39.9% or 49.9% |
| Nationwide | 39.9% |
| Natwest | 39.49% |
| RBS | 39.49% |
| Santander | 39.94% |
| TSB | 39.9% |
| Virgin Money | 19.9% – 39.9% |