UK Overdraft Charges Explained: 40% APR Is Standard
Your high-street overdraft is more expensive than your credit card. A 2020 reform meant to make it cheaper made it worse for nearly everyone. The reason is in the fine print.
Cost of carrying a £1,000 balance for a year
Post-2020 FCA reform put UK overdrafts above almost every other consumer credit rate.
Key takeaways
Since the 2020 FCA reform, UK arranged overdrafts are charged at a single APR around 40%, which is higher than most credit cards.
Most current accounts now charge the same rate whether you are £10 or £1,000 into your overdraft - the simplification meant prices went up for moderate users.
Treat an overdraft as a debt to clear, not a buffer to live in. Pay it off using the snowball or avalanche method alongside any card debt.
Switching to a fee-free overdraft account or one with an interest-free buffer is the single fastest way to stop the bleeding.