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What is Revolut Overdraft?

Živile Šarkauskaite

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Živile Šarkauskaite

May 30, 2023

Revolut has become a transformative force in digital banking services, challenging traditional financial services and institutions with its innovative approach.

But does the impressive Revolut feature set includes overdrafts that have gained attention as a powerful tool for managing short-term financial needs?

In this blog post, we will explore the concept of an overdraft, reveal how it works, and whether Revolut offers this feature.

What is an overdraft?

An overdraft is a form of debt attached to a bank account. It allows you to access additional money and spend more than the actual balance in any of your current accounts. In a sense, overdrafts are loans, but unlike many personal loans, it is not subject to any fixed repayment plan.

If your account balance becomes negative due to overspending, you will be overdrawn and owe a certain amount of money to your bank. As good as it sounds, it also has another side.

While an overdraft can serve as a temporary solution to handle emergencies, avoid a bounced payment, or bridge the gap until your next payday, it is necessary to use it responsibly.

Paying back an overdraft and breaking the cycle of relying on it can be challenging when you have become accustomed to it. The situation is particularly difficult due to high-interest rates, which can reach almost 40%.

How does an overdraft work?

The usage guidelines for your overdraft may vary. Nevertheless, there are two types of it: arranged overdraft and unarranged overdraft.

Arranged overdraft

An arranged overdraft is when a person agrees in advance with the financial institution on the availability of an overdraft facility. It doesn’t mean you can spend money without limit. This means that there is a certain amount of money you can use.

An arranged overdraft is beneficial as the associated fees and interest rates are generally lower. Therefore, having foresight and planning ahead can be highly advantageous. In essence, arranged overdraft is when your bank permits you to utilize an overdraft.

Unarranged overdraft

An unarranged overdraft can occur when someone continues withdrawing more money from their account, even when the bank account’s balance reaches zero or the limit of the arranged overdraft. It is important to note that the bank has not agreed to it in advance.

Sometimes an unarranged overdraft is unavoidable. Unfortunately, this situation often leads to additional costs in the form of interest fees.

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How do you pay off an overdraft?

Many budgeting tools help you track your spending habits, save money and repay your overdraft faster. However, there are also several factors to consider and different strategies to apply when paying your overdraft. Here is a list of tips and tricks you can follow:

Increase your bank account balance.

The primary way to cover an overdraft is to deposit money into the account to bring the balance back into the black. It is important to note that the longer the bank account remains negative, the higher the fees charged by the bank.

Note that banks can change the terms of an overdraft, but they must inform you of this. While it may be possible to negotiate personal overdraft terms with traditional banks, this is not always guaranteed.

In addition, switching to another current account can give you better overdraft terms, even if you are currently making losses.

However, if you decide to use a money transfer credit card to cover the overdraft, please note all transfer fees and the interest rate that may apply after the initial 0% grace period.

Use your savings

Though it may not be the most desirable option, you can always use your savings to cover debts. Paying off an overdraft can help you avoid interest, especially when interest rates on overdrafts can be as high as 40%.

Yes, parting with your hard-earned life savings in cash can be difficult. On the other hand, it ultimately saves you more money in the long run. It is precisely what your emergency fund is for.

Consider switching banks

Being in an overdraft doesn’t mean you’re stuck with your current bank. Switching to an account with lower interest rates can help you focus on paying off the outstanding balance rather than dealing with excessive interest charges.

Therefore, it’s worth exploring different options to find the best deal that suits your financial situation, and the account switch service simplifies the process of switching banks.

However, compare the terms of your new account and make sure it offers better ones. Take into account that you may have to pay the switching fees and any fees the new bank offers.

Use a money transfer credit card

These Revolut cards let you arrange a transfer from your overdraft to your credit card.

While a fee of 3-4% may apply to the amount transferred, 0% interest will be charged on the amount remaining on the credit card.

These cards often offer a 0% interest period of up to 18 months. Therefore, you can manage your debt effectively.

With a credit card, you can simplify your spending abroad, get cash, make payments, save interest and receive money when needed.


Can I get an overdraft on the Revolut account?

Unfortunately for customers, Revolut is not a bank and simply lacks a UK banking licence. Therefore, if you don’t have enough money in your Revolut account, it is likely that your payment will simply be declined.

However, there is optimism that Revolut will manage to acquire a UK banking licence shortly. This may lead to changes in its service offerings.

Which banks allow overdrafts?

Many banks offer overdrafts to their customers. However, it is necessary to note that the availability of an overdraft and the specific eligibility criteria, fees, interest rates, and limits may vary depending on the bank and the type of account.

It is also advisable to consult your bank directly or visit its website for specific overdraft offers and requirements.

Am I allowed to overdraft?

Whether you can receive money overdraw depends on your specific banking agreement and your bank’s policy. Sometimes overdraft facilities are provided as a standard feature for certain bank accounts.

On the other hand, others may require you to apply for an overdraft or may have specific eligibility criteria.

If you are unsure whether you are allowed to overdraft, it is best to consult with your financial institution directly.

They can provide information about the overdraft options available to you, the fees or interest rates that apply, and any requirements or conditions you need to comply with to use the overdraft facility.

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