I was talking to some friends last week. They graduated a few years ago. They have common sense and are very logical. This is the case for most of their friends too, yet lots of them feel very confused and ignorant about how to manage their finances, how things like the fiscal year affects them, why they should save and so on.

This is something they were not taught in secondary/high school and unless you tell me otherwise, the syllabus has not changed. Thus many young adults go to Uni and have no idea how to manage their money, limit how much debt they accumulate & as a result, get very stressed. So I’m going to try and answer some questions in separate posts.

Overdrafts can offer flexible borrowing to meet short-term needs.


Overdrafts are like a ‘safety net’ on your current account; they allow you to borrow up to a certain limit when there’s no money in your account and can be useful to cover short term cashflow problems.

Some bank accounts have a free overdraft built in. If yours doesn’t, you’ll have to ask your bank for an authorised overdraft facility. Their decision will be based on your bank record and you may have to pay a fee to set it up. You don’t have to use an authorised overdraft, but it’s there if you need it and you won’t pay extra charges for accidentally going overdrawn.

You have to pay back your overdraft plus interest. Rates differ between banks and can be fixed or variable. There may also be an arrangement fee and monthly charges.

Unauthorised overdrafts

If you go overdrawn without your banks authorisation, the charges are likely to be high. Your bank may also bounce (refuse to pay) cheques you write or refuse to pay direct debits and charge fees for each refused transaction. They may also charge additional administration fees.


Ironicallcy the cartoon above doesn’t reflect the status quo. Asking for an overdraft is far from frustrating now. Often it is too easy!

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