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Overdraft debt

How can I stop living in my overdraft?

There are very good reasons to spend less time in your overdraft. Overdrafts are an expensive form of debt, and there are practical steps you can take to escape from the cycle, such as gradually reducing your overdraft, using a credit card or savings to pay it off, and separating your overdraft from your day-to-day banking.

If you’ve been using your overdraft to regularly supplement your income,  it may be time to find other ways to do this.


An overdraft can be a useful source of immediate funds in an emergency, but it's an expensive way to borrow. Always look for other cheaper sources of income before using an overdraft, and keep your overdraft as a last resort.

How can I stop living in my overdraft?

It can be all too easy to find yourself spending significant time in your overdraft each month. It may be that it’s a problem that’s accumulated gradually over time. Or perhaps you’ve had to make out-of-the-ordinary payments in recent times, like a major car repair or a deposit on a new home.

It’s also easy to forget that your overdraft is a form of debt. Spending lots of time in your overdraft is an expensive way to borrow money. This is just one reason why you might want to get out of your overdraft as soon as possible, even though it can feel like a difficult thing to do.

Getting out of my overdraft – where do I start?

It can take a while to get out of your overdraft, depending on how much you’ve been using it, and how much you've borrowed. To get started, you should do the following things:

  • Stop using your overdraft. If you no longer need your overdraft, stop using it and instead, work towards paying it off
  • Create (or review) your budget. Work out in full detail what your current spending is, as well as your income. This will be vital when you move on to next steps
  • Speak to your creditor. They could agree to reduce your overdraft limit gradually each month. Or they may be willing to suspend interest and charges on your overdraft for a while

If you're using your overdraft a great deal, and even going into your unarranged overdraft, it may be a sign that you need free, expert debt advice.

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Next steps

You can then take action to pay off your overdraft. These are some methods you could use:

1.) Gradually reduce the amount of your overdraft you spend each month

Try reducing the amount you spend each month by first looking for savings in your budget. Make sure you don't spend all your overdraft each month.

Speak with your lender to make sure the amount you decide to pay is enough to get you out of your overdraft.

2.) Repay the balance using credit with a lower interest rate

You could consider transferring the balance to a credit card which has a lower, more affordable interest rate. Or, you could use an affordable loan with a lower interest rate to pay off your overdraft, and then pay your loan off with a set monthly repayment.

If you get a credit card, don't spend anything else on your new card. Shop around to get the best deal, and use a price comparison site to help you. Finally, check you’re eligible before applying, as applying for more credit may appear on your credit file.

If you choose to repay your card with other credit, keep up with your repayments to avoid extra charges and interest.

3.) Shift your direct debits

One way to reduce the interest and charges you’re paying on your overdraft is to make sure your direct debits and standing orders are as close as possible to when your income arrives each month. That way you’ll spend less time in your overdraft.

4.) Consider separating your overdraft from your day-to-day banking

Speak to your bank about how to do this. They may allow you to set up a new bank account with no overdraft from which you can do your day-to-day banking. This means you’ll be able to treat your existing overdraft as a simple debt that needs to be paid off gradually, and might make it easier for you to stop spending more of your overdraft.

5.) Use savings to clear your balance


If you currently have a pot of savings, it makes sense to use this to clear some or all of your overdraft. That's because the amount you'll pay in interest and charges will far outweigh the amount of interest you'll be gaining in your savings account.

What do I do once I’ve paid off my overdraft?


Once you’ve paid off your overdraft, consider whether it’s a good idea to keep hold of it. How confident are you that you can use it only when absolutely necessary? If you think you may be too easily tempted to use it, you can ask your bank to either reduce your overdraft or get rid of it altogether. Another option is to switch to another bank that offers a basic bank account with no overdraft.

Is there anything else I need to think about?

Our recommendations on how to reduce your overdraft should be used as a guide. You’ll need to think about your own situation to make sure the action you take is suitable for you. Here are some final tips:

  • Think about all of your credit accounts
  • Think about how long it’ll take to pay off or reduce your debts
  • Think about what effect this’ll have on your credit file


Make sure that whichever approach you take, it’s affordable. You can make sure it’s affordable by creating a budget. Download our budgeting form, and for guidance on how to use it, read our guide to budgeting.

Need help with overdraft debt?

Finally, if you're struggling with your overdraft, you should consider seeking free, expert debt advice from StepChange.