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Overdraft debts can be a particularly insidious type of debt that can creep up on you if you are not careful, or if circumstances mean that you start to rely on your overdraft to fund your day-to-day living expenses.

The more you rely on using your overdraft, the higher the interest charges that you have to pay.

It can mean getting into a cycle of debt from which it can be difficult to escape.

An overdraft is like a safety net for your account

They can be an expensive way to borrow money

What is overdraft debt?

An overdraft is like a safety net for your account.  It allows you to get access to and use more money than is currently in your account – up to a given and agreed overdraft limit.  That all sounds fine until you look at the implications in more detail.

It’s important to remember that an overdraft is a type of unsecured debt and that banks can ask for an overdraft to be repaid on demand.  If that happens to you, it could be a real problem if you do not have the funds to meet that demand.

Also, it’s worth bearing in mind that overdrafts can often have higher interest rates than other ways of borrowing. In addition to fees for the creation and administration of the overdraft itself, which can make them an expensive way to borrow money.

You can enter an endless cycle of debt

What other problems are there with overdraft debts?

Apart from the fact that the bank has the right to ask you to pay the overdraft back immediately, and at any time, there are other disadvantages associated with overdrafts such as:

  • You will in almost all cases be charged interest on your overdraft (even if you do sometimes get an initial interest-free period)
  • There can be set-up charges for some overdraft arrangements; and, in some cases, yearly arrangement fees
  • High charges and fees are applied to any unarranged overdraft (where you have exceeded the amount of money in your account, or any overdraft limit that applies to it)
  • Overdrafts are an expensive way of borrowing money if you are continually in your overdraft
  • Banks may (or may not) honour a transaction if you accidentally go over your overdraft; so payments from your account may fail
  • Overdraft debts that were once easy to manage can quickly become unmanageable if your circumstances change and you find yourself relying on it for day-to-day living
  • An overdraft can drive you into an endless cycle of debt
Don't get into debt with an endless cycle of overdrafts

Explore options with your bank

What should you do if you are faced with large overdraft debts?

Dealing with overdraft debts can be difficult when you are also trying to meet your day-to-day living expenses and household bills.

If you have a current account with the same bank that is providing your overdraft facility, then it’s probably a good idea to explore your options with them.

Some possible ways forward might include:

  • Setting up a new basic bank account for you
  • Helping you to reduce your overdraft in a structured way, taking account of your other debts
  • Separating any overdraft(s) from your existing account (by opening a new basic account)

Ringfence your income

Overdraft Facilities

A basic bank account is one which comes without an overdraft facility, but it should allow you to set up standing orders and direct debits; you usually get either a debit or a bank card too.

A basic bank account can be a good option to discuss with your own bank initially.  If that does not work, then you can seek to open a basic bank account with another bank that you do not have any debts with.  Usually opening such an account does not entail any credit checks against you.

If you are wrestling with overdraft debts, and your bank is unable or unwilling to help, you should prioritise your household bills and living costs (such as Council Tax, heating, food etc) and make sure your income is available to you without the bank helping itself to it first.

That is why it can be a good idea to protect your income by setting up a basic bank account with another bank to ringfence your income: that way you get to control what happens to your money.

We are debt advice specialists

How can we help you to deal with your overdraft debts?

At TC Debt Solutions, we know how small overdraft debts can so easily become bigger and more problematic overdraft debts.  As experienced debt advice specialists, we can help you to chart your path through your debts.

If you are struggling with overdraft debts and are looking for a way forward, you can email us 24 hours a day on

Don't panic

What if I am dealing with other unmanageable debts as well as overdraft debts?

It is quite often the case that people struggling with overdraft debts are also trying to deal with a range of other unsecured debts too.

This simply reflects general financial difficulties that anyone can find themselves in, given the right set of circumstances.  If this is you, don’t panic, there are ways of dealing with such situations.

Debt Arrangement Scheme

One way, if you live in Scotland, is a Debt Arrangement Scheme (DAS).  Set up by the Scottish Government, the Debt Arrangement Scheme is a useful alternative to insolvency.

It is an effective way of preventing aggressive court actions being taken by creditors including HMRC,  banks, etc. and it allows you to manage your unsecured debts and work your way to a debt-free and much happier future.

Protected Trust Deed

Other options we can explore with you include a Protected Trust Deed if you are dealing with unsecured debts of £5,000 or more, and you live in Scotland.

A Protected Trust Deed will help you pay off your debts while making life much easier for you and those close to you.

Although it is a form of insolvency, it is really simply a formal agreement between you and your creditors.


If you are a resident in Scotland and have over £3,000 of unsecured debts that you cannot pay back, then bankruptcy may be an option for you.

It gives you a way out of what can be seemingly overwhelming debt. Filing for bankruptcy in the right circumstances, can be the correct thing to do.

It is best to take expert advice before considering bankruptcy.

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If you are trying to negotiate overdraft debts with your bank, or you are struggling with overdraft debts and are looking for a way forward, complete our short form and we will contact you straight back.

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