What to Know About Natwest Overdraft Charges in 2023

Did you know that by using their overdrafts, over a third of Brits generate billions of pounds for banks each year? Overdraft charges, fees, and interest generate tons of money for banks, but if you take the time to select the right overdraft for your circumstances, you can avoid getting stuck with excessive interest and additional charges.

Natwest offers several different current accounts with overdrafts, but are they any good? Here, we’ll cover what you need to know about Natwest’s overdraft charges, overdraft interest rates, and how those features stack up compared to other options.

Note: We mainly refer to arranged overdrafts in this article. If you need a quick refresher on the differences between arranged overdrafts and unarranged overdrafts, check out our article on the topic.

What Charges Are Associated With Natwest’s Overdraft Accounts?

The good news is that with Natwest’s overdraft accounts, there are just two main fees to pay attention to:

• You can be charged an £8 unarranged overdraft-usage fee if you overdraw your account without setting up an arranged overdraft account
• You could be charged an £8 unpaid-transaction fee if you try to use more funds than are available in your arranged overdraft account

In total, Natwest won’t charge you more than £80 a month for fees related to unarranged overdrafts or going over your arranged overdraft, and unpaid transactions (although you can still be charged interest on your arranged overdraft balance). However, by keeping your overdraft in order, you won’t give them a reason to charge you that £80.

What Are Natwest’s Overdraft Interest Rates?

If you’re using a Natwest student or graduate current account, you’ll be glad to hear that those accounts have a 0% interest rate on overdrafts. Unfortunately, for all other Natwest current accounts, overdraft have a representative APR of 39.49%.

What Are the Benefits of Natwest’s Overdraft Accounts?

Natwest’s current account overdrafts have a couple benefits worth mentioning, so let’s take a look:

• Like many arranged overdraft accounts, Natwest’s overdraft gives you easy and immediate access to credit. This can make it a highly convenient way to borrow funds.
• You’ll only pay interest if you use the overdraft account; if you don’t use it, you won’t be charged any fees. This makes it a useful tool to keep in your back pocket, while not being pressured to use it.
• Finally, some of Natwest’s overdraft accounts offer a £10 interest-free buffer. If you accidentally dipped into your overdraft, overdrawing your account by £7 for example, you wouldn’t be charged any interest. This small buffer can give you a lot of peace of mind.

What Are the Drawbacks of Natwest’s Overdraft Accounts?

• Natwest’s representative APR of 39.49% is not the highest, but it’s among the highest. Compared to Starling Bank, for example, which offers a representative APR of 15% and a maximum APR of 35%, Natwest’s interest rates are quite high. Keep in mind that if you don’t qualify for the representative APR, your overdraft interest rate could creep higher than 39.49%
• While Natwest does offer a £10 interest-free buffer, other banks offer much more generous overdraft buffers. Competing overdraft buffers range from the slightly higher (£15 with the Barclays ‘Bank Account’) to the significantly higher (£100 with TSB’s ‘Spend & Save Plus’).

Is Using Your Overdraft a Good Idea?

There’s no simple answer to whether you should use your overdraft account. If you need to borrow money for a short period of time, using your overdraft might be a good choice. If you pay off your overdraft balance promptly, it can even demonstrate to credit reference agencies that you’re good at managing credit.

However, using your overdraft can also be an expensive way to borrow money. When you take into consideration the high interest rates involved with using your overdraft, you might be better off simply using a credit card that’s likely to have a lower interest rate. At the same rate, using your overdraft is far, far safer than using risky forms of borrowing like payday loans.

Generally, it’s important to keep in mind that your overdraft is a form of credit. Using it too much or without careful planning can ultimately damage your credit score, and using it wisely can improve your credit score.

Build Your Credit to Get the Best Overdraft Interest Rate

It’s important to keep in mind that Natwest and other banks are advertising a representative APR. This is the rate that at least 51% of applicants are eligible to receive. However, if you don’t have a good or excellent credit score, you may not qualify for the representative APR. In that case, you could end up with an even higher interest rate.

Building your credit score ensures that you receive the most favourable APR available. But building your credit score is no easy feat. Fortunately, the Pave app is here to help. By reporting your payments to credit reference agencies, monitoring your upcoming bills, and making personalised recommendations for your credit, Pave can help you build your credit. To see the Pave in action, head over to the App Store or Google Play to download the app today!