How to Stop Overdraft Charges Draining Your Account

How to Stop Overdraft Charges: What Someone in This Situation Can Do

Overdraft charges are one of the most common reasons a bank balance stays negative month after month — interest accumulates on the overdrawn amount, and it becomes increasingly hard to get back to zero. The good news is that since 6 April 2020, the Financial Conduct Authority (FCA) banned banks from charging fixed daily or monthly fees on overdrafts, replacing them with a single simple annual interest rate — meaning the cost of an overdraft is now more transparent, even if it can still be steep.

There are several practical steps available to someone who wants to stop overdraft charges building up. Some involve negotiating directly with a bank; others involve switching accounts, restructuring finances, or accessing formal debt support. The information below covers each of these options in straightforward terms.

Understanding How Overdraft Charges Work in 2026

Since the FCA rules took effect on 6 April 2020, all UK banks must charge overdraft interest as a single annual percentage rate (APR), clearly advertised. Banks can no longer add fixed daily charges of, say, £1 or £5 per day, nor can they apply a fixed monthly fee on top of interest. What they can still do is charge a high rate of interest — many high-street banks charge between 19% and 40% APR on arranged overdrafts, and unarranged overdrafts often attract the same rate.

For someone who is consistently overdrawn by several hundred pounds, even a 39.9% APR adds up month by month. The key point is that every day the account stays in the red, interest accrues. That is why breaking the cycle — even partially — tends to matter more than finding a perfect long-term solution immediately.

Practical Steps to Reduce or Stop Overdraft Charges

1. Contact the Bank Directly

One of the first steps worth taking is contacting the bank and explaining the situation. Banks have hardship processes and, in genuine cases of financial difficulty, may agree to reduce or temporarily waive interest, offer a repayment plan, or freeze the account so no further interest accrues. This is not guaranteed, but it is a standard part of how FCA-regulated banks are expected to treat customers in financial difficulty under the Consumer Duty rules.

According to GOV.UK, lenders are expected to treat customers fairly and to consider individual circumstances when someone is struggling to repay. Asking the bank to move the overdrawn balance onto a more manageable arrangement — for example, a low-interest personal loan — is a conversation worth having, because overdraft interest rates are often higher than personal loan rates from the same institution.

2. Switch to a Bank Account With a 0% Overdraft Buffer

Some current accounts offer a small interest-free overdraft buffer — commonly between £0 and £500 — depending on the provider and the account type. Switching to one of these accounts, if someone qualifies, can mean that a small overdraft stops attracting any charges at all. The Current Account Switch Service, backed by the UK government, makes switching relatively straightforward and is designed to complete within seven working days.

It is worth noting that credit checks apply when opening a new account, so this route may not be available to everyone, particularly those who already have county court judgments or a poor credit history.

3. Use a Money Transfer Credit Card

A money transfer credit card allows the cardholder to move credit card funds into a bank account, effectively clearing the overdraft balance and replacing it with credit card debt. If a card with a 0% money transfer promotional period is available, this can stop overdraft interest immediately — turning an expensive overdraft into an interest-free debt for the duration of the promotional period.

This approach requires good enough credit to be approved for such a card, and it only helps if the underlying spending habits change — otherwise the overdraft can simply rebuild while the credit card debt also grows. This is a factual description of how the product works; whether it is appropriate for a given individual's circumstances is a matter for a regulated financial adviser to assess.

4. Set Up a Salary or Benefit Payment to Clear the Overdraft Progressively

Where someone's income is paid directly into the overdrawn account, each incoming payment briefly reduces the balance before it is spent again. Redirecting income into a separate basic bank account — and then making a fixed transfer to pay down the overdraft each month — can create a structured repayment path. Basic bank accounts, available from most major UK banks, do not offer overdraft facilities, which removes the risk of going further into the red.

The Money and Pensions Service (which operates MoneyHelper) publishes information on basic bank accounts and how they work for people who are rebuilding their finances.

5. Apply for Breathing Space

If the overdraft is one of several debts that have become unmanageable, a Breathing Space (formally the Debt Respite Scheme) may be relevant. This is a 60-day period — available in England and Wales — during which most creditors, including banks, are legally prevented from adding interest, fees, or charges, and from taking enforcement action. Breathing Space must be applied for through a debt adviser, not directly by the person in debt.

Breathing Space does not write off any debt, but it gives someone 60 days of protection to get regulated debt advice and consider formal options without the situation worsening. According to GOV.UK, the scheme applies to most personal debts, including bank overdrafts.

When an Overdraft Is Part of a Wider Debt Problem

For some people, an overdraft that cannot be cleared is a symptom of a wider financial shortfall rather than a standalone problem. If someone has multiple debts — credit cards, loans, buy-now-pay-later balances, and an overdraft — dealing with them in isolation may not be sustainable. In those circumstances, formal debt solutions exist that address all qualifying debts together.

The options available in England and Wales include a Debt Management Plan (DMP), an Individual Voluntary Arrangement (IVA), a Debt Relief Order (DRO), or bankruptcy. Each has its own eligibility criteria, consequences, and costs. A DRO, for example, is available to people with qualifying debts up to £50,000, no assets above certain thresholds, and low surplus income — and since 6 April 2024, there is no application fee. Bankruptcy in England and Wales costs £680 to apply for. These are the kinds of decisions that require regulated debt advice, not self-diagnosis.

Where to Get Free Debt Advice

Free debt advice is available from a number of organisations that are authorised by the FCA or funded by the Money and Pensions Service. These are not commercial businesses — they exist to provide impartial support at no cost to the person in debt.

• MoneyHelper — run by the Money and Pensions Service, offers free online tools and telephone advice (moneyhelper.org.uk)
• StepChange Debt Charity — provides free debt advice and can help set up a DMP or refer to other solutions (stepchange.org)
• Citizens Advice — offers free, impartial advice on debt and financial difficulty, available in person, by phone, and online
• National Debtline — free telephone and online advice service for people in England, Wales, and Scotland

Anyone dealing with overdraft charges that have become unmanageable is entitled to contact any of these organisations at no cost. The advisers there are trained in debt law and regulated solutions, and appointments carry no obligation.

Common Questions About Stopping Overdraft Charges

Can a bank legally keep adding interest to an overdraft indefinitely?

Under FCA rules, banks are permitted to charge interest on an overdrawn balance, but they must treat customers in financial difficulty fairly. If the account holder has told the bank they are in hardship, the bank is expected under FCA guidance to consider suspending interest or offering a repayment arrangement. The FCA's Consumer Duty, which came into full effect in 2023, requires firms to act in customers' best interests — persistent charges that trap someone in a cycle of debt may not meet that standard. Complaints can be taken to the Financial Ombudsman Service if the bank does not respond fairly.

Does stopping overdraft charges affect a credit score?

Negotiating a repayment plan or switching accounts will not necessarily damage a credit record on its own. However, a consistently overdrawn account — especially one that has exceeded its agreed limit — may already be having a negative impact. A county court judgment (CCJ), if it ever reached that stage, would stay on the Register of Judgments, Orders and Fines for six years. Getting the situation under control earlier generally protects the credit record better than leaving it to escalate.

What if the bank refuses to help?

If a bank declines to offer any forbearance or arrangement, and the person believes they have been treated unfairly, a complaint can be raised with the bank's formal complaints process first. If unresolved within eight weeks, the complaint can be escalated to the Financial Ombudsman Service, which is free to use and can direct banks to remedy unfair treatment. Information on how to complain to the Financial Ombudsman is available on GOV.UK.

Is an overdraft classed as a priority or non-priority debt?

An overdraft is generally considered a non-priority debt, meaning it does not carry the same immediate enforcement risks as council tax arrears, mortgage arrears, or utility debts. However, a bank can close an account and pass the balance to a debt collector, which can add further pressure and affect credit files. The fact that it is non-priority does not mean it can be ignored — it means other debts with more serious legal consequences (such as council tax) would typically be addressed first in a debt repayment strategy agreed with a regulated adviser.