Credit Building > Which are the best current accounts with overdraft?

Which are the best current accounts with overdraft?

Wollit Team2 minute read · Updated 3rd July 2024

Choosing the right current account with an overdraft can be a pretty tough task, especially given how many options there in the UK.

Let’s have a look at the best ones,considering factors like interest rates, fees, and the key features and benefits of each account.

1. Starling Bank

The Starling Bank current account offers an overdraft as high as £5,000. It also has one of the cheapest overdrafts on the market, with only a 15% EAR (effective annual rate).

However, this is only available to customers with excellent credit scores. If your credit score is only fair, you could see an EAR as high as 35%.

The good news is that Starling reviews rates monthly, so if your credit score improves, the interest you’re paying could reduce.

2. Triodos Bank

The Triodos Bank current account offers an overdraft with a limit of only £2,000, but charges a flat rate of 18% (not variable).

Triodos offers this because the bank brand itself an “ethical business”. As such, it only finances things like renewable energy, social housing, or charities, and doesn’t invest in fossil fuels, fast fashion, weapons, tobacco, or deforestation.

It also charges a flat £3 a month fee for the account – to make up for the loss from not charging excessive overdraft fees.

This account is ideal if you value sustainability or social goals, and also if you want to have more clarity on what interest rate you will pay.

3. First Direct 1st Account

First Direct’s current account, also called “1st Account” offers a generous £250 interest-free overdraft. If you have an overdraft balance higher than this, you’ll have to pay 39.9% EAR. The maximum credit limit is £3,000.

It also offers a limited-time bonus of £175 if you switch to the 1st Account from a competitor.

4. Cumberland Building Society Cumberland Plus

The Cumberland Plus offers one of the most competitive overdraft rates in the UK, at 14.99% EAR (variable), making it an attractive option if you only need to use it occasionally.

The maximum overdraft limit is £1,500, however, one of the lowest on this list.

5. Virgin Money M Plus Account

Virgin Money’s M Plus Account has a competitive overdraft rate as well, of 19.99% EAR variable. Interestingly, it also includes a linked saver feature that pays 7% interest on up to £4,000 for the first year.

The maximum overdraft limit is also generous, at up to £5,000, although it depends on your credit score.

Which account is best?

It depends on your needs:

Do you want to pay as little in interest as possible? Cumberland Plus sounds good, with only a 14.99% EAR.
Do you want to earn interest on your balance when you’re not in overdraft? Virgin Money M Plus gives you this option.
Do you prefer the clarity of a flat, fixed interest rate? Triodos Bank charges 18% regardless of market conditions.
Do you want a high credit limit? Starling gives you up to £5,000.
Do you only use overdraft occasionally and for small amounts? The first £250 are interest free with First Direct.

However, none of this matters if your credit score isn’t good enough to qualify for these accounts. That’s the real answer to the question of which account with overdraft is best: the one you qualify for, and which gives you the best deal. And this depends on your credit score.

Your credit score plays a significant role in determining the interest rate you are charged on your overdraft. Banks use credit reference agencies such as TransUnion and Equifax to assess your creditworthiness and set interest rates accordingly.

Fortunately, now there are many apps that can help you build and improve your credit score. One such app is Wollit.

Wollit works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor that matters for your credit score. In time, a good credit score will help you secure better overdraft rates, higher limits, and overall better terms.