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Repeat overdraft use: What is it and how can I get out of it?

The Financial Conduct Authority (FCA) has introduced new requirements on banks and building societies to make overdrafts simpler, fairer, and easier to manage. This is to help protect the millions of consumers that use overdrafts regularly, particularly those considered vulnerable. The FCA considers overdrafts to be a high cost type of credit, and these new requirements aim to help consumers understand the true cost of an overdraft. 

Here's what the new rules mean, and how you can avoid repeat overdraft use.

What is repeat overdraft use?

Generally, repeat overdraft use is when you frequently go into your overdraft and may be suffering financially as a result, due to high levels of interest and charges. You may be, for example:

  • In your overdraft for ten months of the year
  • Using your overdraft so much that you're being charged a high level of normal interest
  • Using an unauthorised overdraft, and paying very high charges as a result

However, different lenders have different interpretations of what ‘repeat overdraft use’ is.

Overdrafts are typically a higher cost type of credit when compared to other types of borrowing such as  credit cards and personal loans. The Financial Conduct Authority (FCA) has introduced new rules that require lenders to take action to help people reduce high, avoidable costs.

If you’ve received a letter from your lender about your overdraft, or you’re worried about how you’re living in your overdraft, you need to take action. We're here to help.

Struggling with your overdraft?

If you’re worried about your overdraft, and perhaps other debts too, it’s important you seek free, impartial debt advice.

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What will happen if I'm in repeat overdraft use?

Different lenders have different approaches to helping their customers manage their repeat overdraft use. For example, they will:

  • Write to you and inform you about the way you’re using your account, and the cost of this
  • Provide you with information to help you to review your monthly commitments
  • Signpost you to further help, if they think you need it

Where there are indications that you're in financial difficulty, your bank must work with you to help reduce your overdraft use and address the problem. However, your bank still needs to abide by other FCA rules, such as communicating clearly with you, and treating you fairly. Their action to address repeat use of your overdraft should not cause you further financial difficulty.

How can I reduce my overdraft use?

The first step is to speak to your bank or overdraft provider. They may be able to suggest some steps you can take to reduce how much you owe, or reduce your overdraft limit.

The next step to reducing your overdraft use is to create a budget. This will tell you what your income and spending are each month, and may help you identify areas where you could reduce your spending. Reducing your spending should let you free up money to help you reduce the amount you use your overdraft each month.

There are numerous ways that you can reduce your spending, such as:

You might also be able to increase your income by checking you're getting the benefits you're entitled to.

If you have access to digital tools, it’s a good idea to use them to keep an eye on your balance over the course of a month. Mobile banking makes it easy to keep an eye on your balance, and many banks offer alerts to let you know when you’re near to going into your overdraft or near to your limit.

I'm not sure if I need help with my finances

If you're worried you may need help with your finances, then you should try our 60-second debt test.

By answering a few simple questions we'll be able to tell you if you need debt advice. Answer the questions below and we'll help you understand how close you are to having a debt problem and suggest what your next steps could be.

Answer 5 quick questions to find out.

It shouldn't take more than a minute to understand more about your current financial situation.

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Do you usually go up to or over the limit on your cards or overdraft?


Have you borrowed more money to cover your debt payments?


Have you considered or applied for a debt consolidation loan recently?


Are you having issues paying your household bills?


Have you borrowed following job loss, illness or an upheaval in your life?

Things are looking pretty good

You're not showing any of the five danger signs of a debt problem.

We always encourage you to stay on top of your finances. To help you avoid debt problems in the future, we recommend signing up to our regular MoneyAware email, offering tips and advice on getting the most out of your money.

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Not too bad

You've hit one of the five danger signs of a debt problem. While your finances might not be a bed of roses, you may be able to avoid a debt problem if you're careful and budget well.

You can choose whether you want to use our online debt advice tool to help you manage your money and your debts through a personalised budget.

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Or if you're doing OK, sign up to receive our regular MoneyAware email, for tips and advice on getting the most out of your money.

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You may have a problem

You're displaying two or three danger signs, like many of our clients when they first get in touch.

Try our online advice tool for free and impartial advice. We'll help you create a detailed budget and you'll receive a personal action plan to deal with your debts.

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It sounds like there's a problem

Based on your answers it looks like you've got a debt problem and you're struggling financially. We'd recommend using our free online debt advice tool to create a detailed personal budget. We'll then provide you with a personal action plan to help you deal with your debts

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