Best online banks with an overdraft in the UK

From time to time, having an arranged overdraft facility can be helpful for managing your cash flow. Perhaps you need to make a big purchase right before pay day, or maybe you want to pay for a holiday in advance and cover the costs from a payment you know is on its way to you.

An overdraft lets you bridge short term financial gaps - but not all banks offer overdrafts, and there are usually fees to consider too. This guide walks through the best online banks with an overdraft in the UK, to help you choose one.

Plus, we’ll introduce Wise - an electronic money services provider, which offers multi-currency accounts for personal and business customers, with low, transparent fees* and currency conversion at the mid-market exchange rate.

Discover the Wise account

What is an overdraft and how does it work?

An arranged overdraft is an agreed amount you can overdraw your bank account - effectively a small, short term loan your bank gives you as part of your account arrangement. With an arranged overdraft you’ll know you have a buffer if your funds run low - so payments from your account won’t be declined if you run out of money. Instead, you’ll dip into your overdraft facility, and pay interest to your bank for the period of time you’re in debt to them.

It’s worth pointing out that an arranged overdraft is quite different to an unarranged overdraft. An unarranged overdraft means you overdraw your account without prior agreement from your bank. This can result in penalties, and you're unlikely to be able to use your account again until you clear your debts and pay the fees.

Best online banks with overdraft in the UK

Here’s a roundup of the best online banks with overdrafts in the UK, which we’ll look at in a little more detail next:

• Starling Bank¹: Variable overdraft limits with 15% to 35% EAR depending on your credit score
• Monzo²: Up to 3,000 GBP in overdraft, with 19% to 39% EAR for eligible customers
• Kroo³: Invitation only overdrafts for current account holders, up to 1,000 GBP and with 24.9% EAR
• Smile⁴: Up to 500 GBP in overdraft facility which is offered automatically if you’re eligible to apply for a current account

All information in this guide is correct at time of research - 13th March 2025

Starling Bank overdrafts⁵

Starling is a UK licensed digital bank which offers personal current accounts with no ongoing fees to pay. You’ll be able to manage your money with your phone, including smart ways to budget and save, send payments and spend with your linked debit card. On top of this, Starling has arranged overdraft facilities for eligible customers.

You can apply for your overdraft in the Starling app, and then once it is approved you can make your own limits on the go. This means you can stay in control if you don’t want to max out your overdraft facility by simply applying your own lower limits on your account.

Overdraft limits: Limits vary, examples are modeled on an assumed 1,200 GBP limit

Interest: 15%, 25%, 35% EAR based on credit

How to apply: Check your eligibility online or in the Starling app before applying

Monzo overdrafts⁶

Monzo is a popular UK digital bank serving over 11 million personal and business customers. Monzo offers a good range of digital products including a personal account which has no ongoing fees and which offers overdraft facilities subject to meeting eligibility and credit requirements.

There’s interest to pay if you use your overdraft facility, but no penalty fees on top of this, as long as you remain within the agreed amount. You’ll be notified when you enter your overdraft facility, so if you want to add more money to your account to avoid interest costs you can do that too.

Overdraft limits: Up to 3,000 GBP depending on eligibility

Interest: 19%, 29% or 39% EAR

How to apply: Check your eligibility online or in the Monzo app before applying

Kroo overdrafts⁷

Kroo is a fully-licensed UK bank which has interest bearing current account products alongside card services and personal loans. You can apply for a Kroo account in minutes from your phone and start to transact easily - and once you have a current account you may be invited to apply for an overdraft in addition to this.

Kroo overdraft services allow you to get up to 1,000 GBP in overdraft facility, by invitation only. This may mean that Kroo will look at how you transact and use your account before deciding whether or not to extend this facility to you.

Overdraft limits: Up to 1,000 GBP

Interest: 24.9% EAR

How to apply: Applications are by invitation only - open a Kroo account too be eligible to get invited

Smile overdrafts⁸

Smile was launched by Co-operative Bank back in 1999 and offers a fully digital account management option for UK customers. You can also use Smile for mortgages, loans, credit and many other services. To be eligible for an overdraft for Smile you’ll also need to take out a current account with the bank.

Smile current accounts have no ongoing fees to pay and offer flexible card services. You can only get a current account if you fulfil the eligibility criteria for an overdraft as well.

Overdraft limits: 500 GBP

Interest: Not specified

How to apply: Apply at the same time as you apply for your current account with Smile

How to qualify for an overdraft with online banks

You’ll usually apply for an overdraft once you have a current account with your preferred digital bank. Generally, the process requires you to complete an eligibility check and then a full application which includes a credit check.

Ultimately, the bank will decide if they consider you to be eligible for an overdraft based on factors which include your credit score, your history with the bank itself, and your current financial situation. You may be asked questions about your income, residential status and rent, current outgoings and debts, and whether or not you have any dependents, for example. This helps the bank build a picture of your situation so they can lend responsibly.

Overdraft applications and credit checks

Applying for an overdraft might mean you’re subject to a credit check. While this is not a bad thing in and of itself, having frequent checks run can be flagged as suspicious by lenders as it may appear that you’re applying for many different loans or credit facilities. This in turn can damage your credit score.

Because of this, most banks have their own tools which let you see if you’re likely to be eligible for an overdraft - like this one from Starling⁹ - before any formal ‘hard’ credit check is run. The bank’s process should not make any difference to your credit score, so you can safely check whether or not it’s likely that you’ll be offered an overdraft before you complete the application.

Pros and cons of using an overdraft with online banks

Not sure if an overdraft is for you? Here are a few pros and cons to consider while you decide:

Wise — the international account for sending, spending and converting money like a local

While you’re working out the best ways to manage your money, take a look at Wise for your international spending.

Wise isn’t a bank, it’s an electronic money services provider regulated by the Financial Conduct Authority (FCA) in the UK. The Wise account is an international alternative to a bank account that lets you manage your money in 40+ currencies including British pounds and US dollars.

You can send, receive and convert money at mid-market exchange rates and low, transparent fees*. Your money is always safeguarded and every transaction is secured.

Looking to take your savings with you? Wise can also help you with large transfers too.

Sources used:

Sources last checked on date: 13-Mar-2025