What to do when your overdraft isn’t enough
If you find yourself dipping into your overdraft before payday each month, you’re not alone. But if you’re starting to feel like your overdraft isn’t enough to cover your costs anymore, it might be time to stop and take a closer look.
Many people begin using an overdraft as a short-term solution, but it can quickly become a financial trap. Let’s look at why relying on your overdraft can be risky and what safer alternatives are available to help you stay on top of your money.
What is an overdraft?
An overdraft is a type of credit linked to your bank account that lets you spend more than you have. There are two types:
- Arranged overdraft: You agree to a limit with your bank in advance.
- Unarranged overdraft: You go over your balance without permission.
While overdrafts can help cover emergencies or one-off costs, they’re one of the most expensive ways to borrow. Most banks charge daily or monthly interest rates, and these can add up fast.
It can feel like a safety net, but consistently relying on your overdraft to get by is a sign that your income isn’t covering your outgoings.
Over time, this can lead to a cycle where:
- You hit your overdraft limit earlier each month.
- Your overdraft isn’t enough to cover all your bills.
- Interest and fees make it harder to repay.
Soon, what was meant to be a buffer becomes part of your normal monthly spending. This makes it harder to break out of the pattern and can increase your financial vulnerability.
Not sure if you’re relying too heavily on your overdraft? Here are a few red flags:
- You’re regularly in your overdraft for most of the month.
- You’ve stopped seeing it as borrowing.
- You’re using one account to repay another.
- You feel anxious checking your bank balance.
- You’ve reached or exceeded your overdraft limit.
If any of this sounds familiar, you’re not alone. Many people start this way and feel stuck. But the good news is there are ways to regain control.
What can I do if my overdraft is not enough?
If you’ve noticed that your overdraft is not covering costs the way it used to, rising prices could be to blame. Inflation, energy bills, rent, and food prices have all increased in recent years, making it harder for overdraft users to keep up.
Banks don’t automatically increase your limit, either. When your overdraft limit is hit, any further payments might be rejected, leading to missed bills or penalty charges.
And once you’re at your limit, you lose the ability to respond to emergencies, making your finances feel even more fragile.
The first step is to understand the full picture of your finances. Take a few minutes to:
- Write down your income and essential costs
- Look at how much of your overdraft is being used and when
- Work out whether you’re repaying any of it, or just covering the interest.
This can help you see whether it’s a short-term issue or part of a bigger debt problem.
If it’s the latter, speaking to a debt adviser could be the best way forward. At MoneyPlus, we offer confidential, non-judgmental advice to help you create a budget that works for you. You can also find free, impartial guidance at MoneyHelper.
How can I stop using my overdraft?
If you’re finding that you use your overdraft to cover everyday costs, here are a few lower-risk options to explore:
- Budgeting tweaks
Even small changes to spending habits can make a difference. Try tracking your spending to spot areas where you can cut back by determining what are your priority and non-priority debts.
- Payment holidays or reduced bills
If you’re struggling to pay energy, water or council tax bills, you might be able to request a payment plan or reduction. Speak to your provider directly or get advice from a debt adviser.
- Zero-interest credit (with caution)
Some 0% interest credit cards or Buy Now Pay Later options may be more affordable than an overdraft, but they still come with risks. Only use these if you know you can repay on time.
If you’re juggling multiple debts or unable to repay what you owe, a more structured approach might be right. This could include a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).
These solutions can reduce your monthly payments and help you regain control of your finances
The next steps
Getting out of an overdraft spiral won’t happen overnight, but there are steps you can take to start moving forward:
- Speak to your bank: They may agree to freeze interest or offer a repayment plan.
- Stop using the overdraft if you can: Switch regular payments to a basic account with no overdraft facility.
- Tackle other debts: Reducing your other outgoings can help free up money.
- Get advice: Talking to a debt adviser could give you new options you hadn’t considered.
If your overdraft feels like it’s become part of the problem rather than the solution, it might be time to rethink your approach. You might find it useful to read up about different types of debt and how to manage them to find something that works for you.
How MoneyPlus can help
You don’t have to wait until things reach a crisis point. If you feel like your overdraft is no longer working for you, or you’re constantly worried about money, it’s a sign to seek support.
AT MoneyPlus, we have over 25 years of experience helping people find practical, personalised solutions to their debt problems. We’re regulated by the Financial Conduct Authority (FCA) and we’re here to help you make informed decisions that work for your situation.If you’re ready to talk, contact us to speak to a MoneyPlus adviser.
