An overdraft is a way of borrowing money from your bank, linked to your current account – basically so you can occasionally spend more than you have.
A bank overdraft can be authorised or unauthorised:
- Authorised overdrafts are arranged in advance. You agree a borrowing limit with your bank, and you can spend money up to that limit through all the normal payment methods.
- Unauthorised overdrafts happen when you spend more than you have in your bank account without agreeing it in advance and you get overdrawn or, if your bank has agreed an overdraft for you but you go over the limit they set.
If you struggle to keep track of your money ĠEMMA suggests that you take the following action:
- Organise your payments. If any regular payments go out of your account just before payday, change them to just after payday, if possible.
- Use text alerts. If your bank offers text alerts, set one up to warn you when you are low on money.
- Know your overdraft limit and how much you will pay if you go over it.
- Keep track of your balance. Check when you use a cash machine or check online with internet banking, or keep a running total yourself.