Most, if not all high street banks in the UK offer an overdraft facility. Although the availability across specific account types will differ.
Overdrafts are completely discretionary (as in you can tell your bank to cancel the overdraft should you wish), however the limit imposed is set by discussions between you and your bank. This could be affected by credit history, your usual bank balance, how much you pay in to your account each month and many other factors. Also bear in mind that overdrafts are a courtesy service offered by banks to customers, and can be removed at any time.
Compared to other forms of finance, overdrafts are extremely flexible (i.e. you can use them as a temporary loan) to buy anything, or even pay bills. They are most useful to stop any payments getting bounced by your bank (which would normally incur charges). Overdrafts interest rates can vary massively depending on the programs offered:
- Unauthorised overdrafts (overdrafts taken without your bank's permission) are practically the most expensive form of borrowing possible. Not only that, but they also cause fees to be charged to your account which can be excessive.
- Authorised overdrafts are reasonable for interest charges (considering their flexibility) as the interest will usually only be calculated daily.
- Interest free overdrafts are available (usually a selling point for a specific account from a specific bank). They are normally limited in the amount covered, but an arranged overdraft can be used in addition to any interest free amount.
- A report on the current overdraft rates for your specific account has to be made available by your bank, and this should also include a list of options should you wish to change accounts.
Overdraft protection can be obtained although check the terms and conditions on this to make sure the protection covers.
Finally, bear in mind that any monies borrowed on an overdraft is repayable on demand by the bank (i.e. they can force you to pay it back whenever they choose).
