Overdraft and unpaid payment charges: what limits apply?

Start with the name of the charge. Different rules apply to interest and refused payments.

The answer in 2 lines. England does not have a single standard pound limit covering every bank incident charge. For ordinary personal current accounts, overdraft borrowing is charged through annual interest rather than daily borrowing fees. Unarranged overdraft interest cannot be higher than the relevant arranged rate. A fee for refusing a payment is different: it must reasonably reflect the bank's actual costs. Check your account terms, request an explanation and tell the bank immediately if charges leave you unable to pay for essentials.

Start with the statement

Identify whether the entry is overdraft interest, an unpaid transaction fee, an account subscription or a charge from the organisation you were trying to pay.
Find the account's current tariff and the terms that applied when the charge arose. Ask the bank for copies through secure banking if you cannot find them.
Ask for a written explanation of the calculation, including the balance, rate and period used for interest.
If the charge is wrong or is worsening financial hardship, ask for correction, repayment or support and keep the response.

Stop: danger

A monthly maximum is not necessarily a complete limit: ask exactly which charges it covers, particularly whether arranged overdraft interest is excluded.
An unsuccessful payment can still leave a bill unpaid: contact the intended recipient to arrange payment.
Do not assume an expensive charge is automatically refundable: explain the error, unfair treatment or financial difficulty behind your request.

The rules on overdraft borrowing

Under the rules checked in 2026, ordinary personal current account overdraft charges must take the form of an annual interest rate. Separate daily or monthly fees for using that overdraft are not permitted. Unarranged borrowing cannot carry a higher interest rate than the relevant arranged overdraft.

The Financial Conduct Authority's overdraft pricing rules set out the requirements and exclusions. Use the sections on interest charges and unarranged overdrafts when asking the bank to explain a disputed entry. Specialist accounts and some providers fall outside these provisions.

What if a payment is refused?

A refused Direct Debit or standing order is not the same as an overdraft being used. A bank may charge an unpaid payment fee where the applicable terms and rules allow it. There is no standard national pound amount to insert in place of your bank's tariff.

The FCA's explanation of refused payment fees says these should reasonably correspond to the cost of refusing payments. Use that explanation to ask what the fee represents. A separate late-payment charge from the bill provider needs checking against that provider's terms.

What not to do

Adding every account charge together and assuming the overdraft rules cover them all.
Comparing an annual interest rate directly with a fixed fee without checking the amount borrowed and time involved.
Ignoring messages because you cannot afford the balance.
Paying a claims service when you can complain to the bank and the ombudsman yourself for free.

Make your request specific

Write: 'Please explain the charge shown on my statement, the term allowing it and how you calculated it.' Identify the entry and attach the relevant statement, keeping unrelated personal information out of unnecessary correspondence.

If appropriate, add: 'These charges are leaving me unable to cover essential living costs. Please assess what support you can offer.' Ask separately for any mistaken charge to be corrected and for future charges to be reviewed. Keep a copy and note what outcome you requested.

Escalating a dispute

Make a formal complaint to the bank first. For most overdraft charging complaints, the usual response period is eight weeks; payment service complaints can have shorter deadlines.

Follow the Financial Ombudsman Service's complaint steps to check when you can escalate. Its linked online form checks readiness and asks what happened. Include the bank's final response and evidence. Normally, referral must be within six months of the final response.

Good to know

These banking rules apply across the UK; this guide addresses personal accounts used in England.
An agreed overdraft limit is borrowing permission, not an interest-free allowance.
If you are repeatedly overdrawn, ask for help with the pattern as well as the disputed charge. See the related support guide.

Illustrative example: Daniel sees interest and an unpaid payment fee on his statement. He asks for separate explanations. He also tells the bank that the charges are affecting his ability to buy food, so his complaint covers both the calculation and the support he needs.

A made-up story, for illustration.

Bobby

Sources, verification, confidence

Verified on 6 November 2026, for England. Confidence: high for overdraft pricing requirements, the distinction between interest and refused payment fees, and complaint routes; medium for any individual charge or monthly maximum, which depends on the account terms and circumstances. The FCA pricing chapter consulted includes updates published in 2026. No market-average rate or universal pound cap is asserted.