Maximum monthly charge for unarranged overdrafts

An unarranged overdraft is what happens when you spend more than you have in your account without agreeing it with your bank first, including going over the limit of an arranged overdraft¹. Since the rules changed, banks can no longer charge more for an unauthorised overdraft than for an authorised one on personal current accounts, and each bank must publish a monthly maximum charge that caps what it can take from you in unarranged overdraft interest and fees².

That cap is not one national figure. It is set by each bank, and the published caps in this market run from £4.50 to £90 a month. AIB (NI) caps unarranged overdraft charges, including unpaid fees, at £90 per monthly charging period³. Virgin Money's M Plus and Club M accounts cap theirs at £20 a calendar month⁴. Bank of Ireland UK, TSB's Spend & Save and the Bank of Ireland UK Graduate Account cap theirs at £30⁷. Ulster Bank's standard adult current accounts cap theirs at £18.80, which includes an unpaid transaction fee where one applies¹¹. Danske Choice and Choice Plus cap theirs at £4.50¹². HSBC states its Bank Account has no unarranged overdraft charges at all, and Halifax's Ultimate Reward account lists no unarranged overdraft interest, fees or charges¹³.

Monthly caps compared: from £4.50 to £90 per month

The monthly maximum charge is the ceiling a bank puts on what it can charge you for using an unarranged overdraft in a single charging period. It is not a fee you pay for having the facility, and it is not a target: if your charges come to less than the cap, you pay the lower figure. The cap only bites when a month's interest and fees would otherwise exceed it.

The spread across the market is wide, and it reflects different pricing models rather than different levels of protection. At the top, AIB (NI) caps unarranged overdraft charges, including unpaid fees, at £90 per month³. In the middle, Bank of Ireland UK, TSB's Spend & Save account and the Bank of Ireland UK Graduate Account all cap at £30⁷. Virgin Money's M Plus and Club M accounts cap at £20 a calendar month, and the First Direct 1st Account linked to an Offset Mortgage also carries a £20 monthly maximum charge⁴. Ulster Bank's standard adult current accounts cap at £18.80, including an unpaid transaction fee where applicable¹¹. Danske Choice and Choice Plus sit lowest among the charging accounts at £4.50 a month¹².

At the bottom of the range are accounts that charge nothing for unarranged borrowing. HSBC states its Bank Account has no unarranged overdraft charges, and Halifax's Ultimate Reward account lists no unarranged overdraft interest, fees or charges¹³. For a reader comparing accounts, the cap is one number among several: the monthly account fee, any interest-free threshold and the arranged overdraft rate all affect what an overdraft costs overall¹⁸.

What the cap does not cover: unpaid transaction fees and arranged overdraft interest

The cap is often described as covering everything to do with going overdrawn, and that is not quite right. What it covers is set out by each bank, and the pattern is consistent: interest and fees for going over or past your arranged overdraft limit, fees for each payment the bank allows despite a lack of funds, and fees for each payment it refuses due to lack of funds¹⁵. Those three categories are the ones that count towards the monthly maximum.

What sits outside the cap is the cost of an arranged overdraft. If you have agreed an overdraft limit with your bank and you stay inside it, the interest you pay is arranged overdraft interest, not an unarranged overdraft charge, and it is not counted against the monthly cap. The same applies to any monthly account fee on a packaged account, and to charges for other services such as using your card abroad, where a foreign exchange fee of often around 3% of the transaction amount and a cash machine charge of typically between £1 and £3 per use can apply¹⁶.

The distinction matters because a reader can be inside their arranged limit, paying interest every month, and still see no benefit from the cap. It also matters for anyone who goes over the limit: from that point, the charges become unarranged overdraft charges and start counting towards the cap. The FCA's definition of an unarranged overdraft charge is broad, covering any charge by way of interest or otherwise that would not be due but for the fact that the customer has borrowed, borrowed further or continues to borrow using an unarranged overdraft².

Arranged or unarranged: how each overdraft is charged

An arranged overdraft is one you have agreed with your bank in advance. You apply for a limit, the bank decides whether to give it to you, and you pay interest on whatever you use. An unarranged overdraft is what happens when you spend past that limit, or past zero if you have no agreed limit at all¹. The two are charged differently, and the difference is the reason the monthly cap exists.

For an unarranged overdraft, the bank charges interest on the amount over the arranged limit for the period you are over it²². Virgin Money's key features document states plainly that you will pay unarranged overdraft interest, and its terms add that unarranged overdrafts are repayable on demand and subject to interest and charges set out in the scale of charges²³. That repayable on demand point is important: an overdraft is not a loan with a fixed term, and the bank can ask for the whole amount back in one go if it chooses²⁵.

The rules also constrain how much more an unarranged overdraft can cost than an arranged one. The rate of interest on the unarranged overdraft must not exceed the rate on the arranged overdraft, or where there is no arranged overdraft, the relevant rate identified for a comparable account². For personal current accounts, banks and building societies can no longer charge more for an unauthorised overdraft than for an authorised one²⁵. The practical effect is that going over your limit is no longer priced as a penalty rate, though it still carries consequences for your credit file and your relationship with the bank.

Does going into an unarranged overdraft affect my credit report?

It can, and the trigger is time rather than amount. First direct states that an unarranged overdraft lasting more than 30 days could have a negative impact on your credit rating, and its overdraft page repeats that using an unarranged overdraft can have a negative impact on your credit rating²⁶. Reliance Bank sets out the reporting rule in more detail: if you have been in a continuous unarranged overdraft for 30 or more days, the account is reported to credit reference agencies, while the arranged overdraft limit and usage are reported as standard¹⁷.

The distinction between the two types of overdraft shows up here as well. An arranged overdraft that you use and stay inside is reported as part of your normal account conduct. An unarranged overdraft that runs for a month or more is treated as a mark against you. That is separate from the charges themselves, and it can outlast them: clearing the balance stops the clock, but the mark may already have been recorded.

There are other consequences beyond the credit file. National Debtline's guidance for Northern Ireland consumers notes that you may have to pay a penalty charge and a high rate of interest, that your bank may charge for sending a reminder letter and for direct debits or cheques put through the account, and that the bank may freeze the account until the overdraft is paid off²⁸. Freezing an account is a serious step, and it is one of the reasons the rules require banks to alert customers who overdraw without an arrangement, or exceed an arranged limit, for a period exceeding one month²⁹.

Paying off an overdraft before you switch or close an account

An overdraft is repayable on demand, which means the bank can ask for the whole amount back in one go²⁵. That single rule shapes everything about switching and closing an account while you are overdrawn. If you are using your overdraft, you will have to pay it back before you can close your account, and you will lose access to statements once it closes, so copies are worth keeping if you need them¹⁶.

Switching is a different question from closing. MoneyHelper confirms you can switch using the Current Account Switch Service even if you are overdrawn¹. Some providers will even let you switch if you have a large overdraft debt outstanding, though there may be a charge to do this³⁰. Where the new bank will take on the debt, the funds covering what you owe are sent to your old bank and you owe the overdraft balance on the new account instead. Where the new bank offers a lower amount, or you cannot get an overdraft at all, you need to arrange to pay off the remainder separately before you can switch or close the old account¹⁶.

Independent Age's guidance puts the same point more bluntly: if you are currently overdrawn, you might not be able to switch bank accounts until you have paid off the overdraft³¹. The two statements are not in conflict so much as describing different cases. The switch service itself does not block an overdrawn customer, but the new bank's decision on whether to take on the debt does, and that decision is where the practical barrier sits.

If clearing the balance is the obstacle, repayment plans are one route. Lloyds Bank and Bank of Scotland both describe repayment plans that could clear an unarranged overdraft in 2 to 12 months³². StepChange's guidance on overdraft debt and on stopping living in your overdraft covers the wider options, including where the debt has become unmanageable³⁴.

Complaining about overdraft charges

Overdraft charges are a recognised category of complaint, and the volumes are published. The Financial Ombudsman Service recorded 1,100 overdraft complaints in Q1 2025/26 and 834 new overdraft complaints in Q4 2024/25³⁶. For context, current account complaints across the same period ran far higher, at 8,945 in Q1 2026/27³⁸. The ombudsman's data shows the category is active rather than rare.

The policy background is worth knowing because it explains why some older complaints exist. StepChange's response to the FCA's CP18/42 overdraft consultation called for aligning authorised and unauthorised overdraft fees and banning the practice of charging excessively high unauthorised fees³⁹. That consultation preceded the rules now in force, and complaints about charges incurred before the changes are a different matter from complaints about charges under the current cap.

StepChange's own guidance describes the problem in plain terms: your overdraft has high interest and charges³⁴. If charges have pushed you into difficulty, the options include a repayment plan, as Lloyds Bank and Bank of Scotland describe, or a conversation with a free debt advice service. StepChange, National Debtline and MoneyHelper all provide free, impartial help, and the Financial Ombudsman Service can look at a complaint once the bank has had the chance to resolve it³⁴.

What happens if you do not have enough money to cover a payment

When a payment goes out and there is not enough in the account to cover it, the bank has two choices, and both can cost you. It can allow the payment and charge a fee for doing so, or it can refuse the payment and charge a refused payment fee. MoneyHelper notes there are usually fees or interest if you spend more than you have, including when there is not enough to cover a Direct Debit or standing order⁴¹. Both types of fee count towards the monthly cap on unarranged overdraft charges¹⁵.

Some banks handle this differently. Virgin Money's M Plus terms state that a temporary unarranged overdraft may be given with interest charged each day, or the payment stopped, and that the bank will not charge a Refusing A Payment Due to Lack of Funds Fee⁴². That is a specific term for that account rather than a general rule, and it shows why the cap alone does not tell you what a month of unarranged borrowing will cost.

The wider point is that the cap protects against the worst of the charges, not against the consequences. A refused Direct Debit can affect the company you were paying, and a continuous unarranged overdraft of 30 days or more is reported to credit reference agencies¹⁷. If you are choosing an account and want to avoid these charges altogether, basic bank accounts are designed for people who want to avoid overdrafts entirely, and MoneyHelper's guidance on choosing an account for a Universal Credit payment covers the same ground⁴³.