Current Accounts Free Overdraft
If you’re looking for a current account that comes with a free overdraft facility then our experts have compared their top choices.
Are current accounts with interest free overdraft a good idea?
Everyone seems to have financial worries, and many of them revolve around their bank accounts. After the banking crisis hit, it seemed as though most of the high street banks no longer wanted the trade of the average account user. This has made it much harder for working people to get loans, credit cards or simple overdrafts from their bank. However, if you are determined to get an overdraft, and want one which is better for the user than for the lender, then you might think about taking out an interest-free overdraft with one of the banks.
What is the problem with a standard overdraft?
If you are able to get an overdraft from most banks, you will find that you are charged a high rate of interest. In fact, most of the banks and building societies that still offer overdrafts charge high rates of interest, sometimes reaching 20% or more. This can cost you a great deal. At the same time, if you go over the amount allowed on your account, you can expect to get a lot of charges, so that a couple of days in the red can cost you nearly £100. Finding a bank account which allows you to take out an interest free overdraft means that you'll never have to pay a huge fee on top of your outstanding overdraft debt.
What should I look for in an interest free overdraft?
If you are interested in getting an interest free overdraft from your bank, then there are a few things that you'll need to consider. Firstly, the overdraft is only a good idea if you want to borrow something less than £500, as anything above this sum is likely to result in fees being charged on the account. If you want to arrange a small overdraft, perhaps just £100, in order to cover times when you might accidentally take out more than you have in the account, then the interest free overdraft can be ideal. If you really need to borrow the money, however, other types of loans may suit you best.
You should also ask the banks whether the standard current account will allow you to take out an interest free overdraft. Sometimes, these overdrafts are only available if you have a monthly-fee account, which can mean that you lose as much as you gain. In addition, some of these overdrafts are for a limited period only, which can mean that you end up paying more on the overdraft after a few months have passed.
What are the best interest free overdraft accounts?
If you are looking for an interest free overdraft, then you need to consider the other benefits aside from the overdraft. For example, if you take out an overdraft with the TSB Classic Plus, then you will get a £25 interest free amount, then 19.9% APR. With the M&S bank, on the other hand, you can get a current account with £100 interest free overdraft, and then 15.9% APR if you need more. There is no monthly fee, and no interest to pay on any part of the account except the overdraft. First Direct offer a current account with £250 interest free and then 15.9% APR, but charge £10 in fees each month.