Arranged or unarranged overdraft: what are the rules?

An overdraft is borrowing. Check the agreement before the balance slips further.

The answer in 2 lines. An arranged overdraft is borrowing agreed with your bank up to a limit. An unarranged overdraft happens when you go below zero without an agreement, or exceed your agreed limit. Personal current account overdrafts are generally charged through interest rather than daily borrowing fees. Your bank can refuse payments, and an overdraft is not guaranteed permanent funding. If you cannot clear it without missing essential bills, contact the bank and seek free debt advice.

The first steps

Find your overdraft agreement and latest statement. Check the agreed limit, interest rate, any interest-free allowance and whether a reduction has been announced.
Check pending payments as well as your displayed balance. Enable low-balance and overdraft alerts where available.
Tell your bank if repayment would leave you unable to cover essentials. Ask what support it can offer and request confirmation in writing.

Stop: danger

What changes when you exceed the limit?

Being within an arranged limit means the borrowing has been agreed. Going beyond it does not automatically extend that agreement. The bank may allow a payment, refuse it or ask you to bring the balance back within the limit.

For personal current accounts covered by the rules, the FCA overdraft pricing rules prohibit fixed daily or monthly borrowing charges and prevent a higher interest rate for an unarranged overdraft than for the arranged overdraft on the same account. Read the sections on charges and unarranged interest when checking a disputed entry. A refused-payment fee is a separate issue: ask the bank to identify exactly what it charged for.

Work out what the borrowing really costs

Use the rate and charging information in your own agreement. There is no universal overdraft rate or allowance. Interest depends on your balance and how long you remain overdrawn; an agreed facility can still be expensive.

The public guidance service MoneyHelper explains overdraft charges and managing the limit. Read its charges section alongside your statement. Separate borrowing interest from account subscription fees or other services before challenging a total.

What not to do

Treating an overdraft limit as extra income: wages paid into an overdrawn account first reduce the borrowing.
Taking out more credit without checking affordability and the total cost.
Ignoring messages about repeated use or a reduced limit.
Cancelling essential payments without arranging another way to pay the bill.

If you are overdrawn most of the time

Explain whether the problem is a temporary expense, reduced income or a continuing gap between income and essential spending. Prepare recent statements and a realistic budget. Ask the bank to consider affordable repayments and whether interest relief is appropriate; do not assume either will be automatic.

The FCA rules on repeated overdraft use require banks to identify harmful patterns and respond. Use the sections on interventions to understand why the bank has contacted you. Tell it if a proposed reduction would cause hardship rather than agreeing to an unaffordable plan.

Getting help or challenging a charge

For local support in England, open MoneyHelper's free debt advice locator. Choose telephone, online or face-to-face help and use the contact details provided. Have income, essential bills and debt balances ready.

For a complaint, follow the FCA's complaint steps: explain what happened, attach relevant statements and say what remedy you want. If unresolved, use the Financial Ombudsman Service complaint page to check eligibility and submit your evidence. It is free.

Good to know

The complaint time limits checked in 2026 generally allow the bank eight weeks for an overdraft complaint and give you six months from its final response to approach the ombudsman. Check the linked time-limit page for your case.
This guide covers England. The banking framework is broadly UK-wide, but formal debt solutions and court procedures differ between the nations.
An agreed overdraft can be reviewed or withdrawn. Contact the bank promptly if its proposed change would leave you unable to meet essential spending.

Illustrative example: in Leeds, Sam notices that payday only briefly brings the account back into credit. Sam gathers statements, writes down essential spending and tells the bank that simply lowering the limit would leave bills unpaid. A free debt adviser helps Sam assess an affordable proposal before agreeing to it.

A made-up story, for illustration.

Bobby

Sources, verification, confidence

Verified on 6 November 2026, for England. Confidence: high for overdraft pricing principles, repeated-use support and complaint routes; medium for an individual outcome, which depends on the account agreement and circumstances. Rules and time limits stated are those checked in 2026. This is general guidance.