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What is an overdraft?

An overdraft is a way of borrowing money through your bank account. You'll go into an overdraft if you spend more money than is in the account. When you do this, it means you're 'overdrawn'.

Read on to find out how an overdraft works and how you can apply for an arranged overdraft with Halifax.

How does an overdraft work?

Arranged overdrafts

Arranged overdrafts

These are pre-arranged with the bank and act as a short-term safety net, meaning you still have access to funds if you don’t have money in your account. You can apply for an arranged overdraft when you first open the account, or at a later date. 

If you use an arranged overdraft, you may have to pay interest. Some providers may include zero interest up to a certain amount borrowed.

Unarranged overdrafts

Unarranged overdrafts

Your bank may allow you to use an unarranged overdraft if you try and spend more than is in your account and you don’t have an arranged overdraft set up. You may also be able to use an unarranged overdraft if you try and make a payment that would go over your arranged overdraft limit.

Depending on the circumstances, your bank may decline the payment rather than let you use an unarranged overdraft. If you do use an unarranged overdraft, you may have to pay interest charges depending on your provider.

What is my arranged overdraft limit?

What is my arranged overdraft limit?

An arranged overdraft limit is the maximum amount the bank has agreed to let you go overdrawn by. At Halifax, you can see what your overdraft limit is by signing in to your Online Banking account.

You can decrease your limit and can apply to increase it using Online Banking, over the phone or at your local branch.

Does an overdraft affect my credit score?

Does an overdraft affect my credit score?

If you have an arranged overdraft and manage it well, there’s unlikely to be a major impact to your credit score. However, if you don’t pay it off regularly, have payments declined or use an unarranged overdraft, this could have a negative impact on your credit score.

Before you are accepted for an arranged overdraft, the bank might complete a credit check. This could impact your credit score.

Will I pay interest on my overdraft?

Will I pay interest on my overdraft?

Arranged overdraft interest rates can vary for different accounts. You can use our arranged overdraft calculator to find out how much interest you could pay if you use a Halifax arranged overdraft.  

Halifax customers can also take advantage of our grace period. So, if you use your arranged overdraft and bring it back into credit before midnight the same day, you won’t have to pay any interest for that day.

Some accounts may provide an overdraft with an interest-free amount. This means you’ll only pay interest on any money you borrow above that amount.

What happens if you can't repay your overdraft?

What happens if you can't repay your overdraft?

We understand that going into your arranged overdraft may be hard to avoid at times. So, if you find yourself struggling to pay it all back, we can talk to you about any money worries you may have.

If you don’t pay off your arranged overdraft, including any interest, this may have a negative impact on your credit score.

Should I consider an overdraft?

Should I consider an overdraft?

Arranged overdrafts can be a short-term safety net if you find yourself without the funds you need in your account.

But just like any kind of borrowing, you need to make sure it’s the right option for your spending needs. If you’re looking to use money for specific items such as a car or a holiday, a credit card or loan might suit your needs better. 

Compare different borrowing options

Useful tools

Arranged overdraft cost calculator

Arranged overdraft cost calculator

Use our arranged overdraft cost calculator to find out how much interest you may have to pay based on your account.

Calculate arranged overdraft costs

Arranged overdraft eligibility

Arranged overdraft eligibility

See if you’d qualify for an arranged overdraft in a few simple steps.

Am I eligible for an arranged overdraft?

Apply for an arranged overdraft

Apply for an arranged overdraft

Apply online and manage your arranged overdraft with Halifax today.

Apply for an overdraft

Don't have an account with Halifax?

Don't have an account with Halifax?

Compare our different bank account options and set up an arranged overdraft when you apply.

Explore our bank accounts

Help & guidance

Help & guidance

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Existing customers

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