Overdraft

A credit facility linked to a current account that allows you to spend more money than you have in your account, up to an agreed limit. Arranged overdrafts are agreed in advance with the bank and usually carry lower interest rates. Unarranged overdrafts occur when you exceed your balance without prior agreement and are far more expensive. Since 2020, UK banks have been required to charge a single annual interest rate (typically 15–40%) rather than daily fees.

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