How do overdrafts work?

theDon876

Do you pay a fixed amount per month and also have fees or charges for not being in red?

jimjames

It depends on the bank but I think most are now interest rate based

colsten

https://www.moneyadviceservice.org.uk/en/articles/overdrafts-explained

eskbanker

theDon876 said:

Do you pay a fixed amount per month and also have fees or charges for not being in red?

There used to be fixed daily charges and fees/charges for not being in the black, but the FCA changed the rules to revert back to a simpler interest-based model, so now it's purely daily interest on the amount outstanding.  However, it seems that the FCA didn't anticipate that the banks would all gravitate to significantly higher interest rates, so they announced an investigation into the pricing....
https://www.fca.org.uk/news/press-releases/fca-confirms-biggest-shake-up-overdraft-market
https://www.fca.org.uk/news/statements/fca-gives-update-banks-overdraft-pricing-decisions-and-plans-support-consumers

theDon876

eskbanker said:

theDon876 said:

Do you pay a fixed amount per month and also have fees or charges for not being in red?

There used to be fixed daily charges and fees/charges for not being in the black, but the FCA changed the rules to revert back to a simpler interest-based model, so now it's purely daily interest on the amount outstanding.  However, it seems that the FCA didn't anticipate that the banks would all gravitate to significantly higher interest rates, so they announced an investigation into the pricing....
https://www.fca.org.uk/news/press-releases/fca-confirms-biggest-shake-up-overdraft-market
https://www.fca.org.uk/news/statements/fca-gives-update-banks-overdraft-pricing-decisions-and-plans-support-consumers

Any idea of the fees or charges for the bank of Scotland?

For example, I was overdrawn by about £20(I have a £500 overdraft) I get a text telling me to add funds by the end of the day or else..I didn't add funds.

I went further overdrawn up to £100 in next few days, I get no more texts. I then add funds to bring overdraft back to neutral.

Can I expect charges/fees/interest at some time in the future for this or how does it work?

eskbanker

theDon876 said:

Any idea of the fees or charges for the bank of Scotland?

For example, I was overdrawn by about £20(I have a £500 overdraft) I get a text telling me to add funds by the end of the day or else..I didn't add funds.

I went further overdrawn up to £100 in next few days, I get no more texts. I then add funds to bring overdraft back to neutral.

Can I expect charges/fees/interest at some time in the future for this or how does it work?

https://www.bankofscotland.co.uk/bankaccounts/overdrafts/cost-calculator.html allows you to model costs for different scenarios, so, for example, £100 for five days at the standard 39.9% rate is 45p. 

The parent page https://www.bankofscotland.co.uk/bankaccounts/overdrafts.html explains more detail about their overdrafts.