What is an overdraft? How borrowing on a current account works
By SendPay Business · · 2 min read
An overdraft lets you spend more money than you have in your current account, up to a limit. It is a form of borrowing, so the bank usually charges interest or fees on the amount you are overdrawn.
Arranged and unarranged overdrafts
An arranged overdraft is agreed with your bank in advance, with a set limit. An unarranged overdraft happens when you spend past your balance or past your agreed limit without permission, and the bank may refuse the payment instead.
How charges usually work
- The bank sets an interest rate on the overdrawn balance.
- Interest builds up daily on what you owe.
- Some banks give a small interest-free buffer.
- Paying money in clears the overdraft and stops the interest.
Why many money apps have no overdraft
Offering an overdraft means lending money, which needs a lending licence and credit checks. Many app-based accounts are e-money accounts, which can only spend the balance loaded onto them, so payments are declined rather than taking the account below zero.
Where SendPay fits
SendPay does not offer overdrafts or lending. A SendPay platform gives your customers accounts, branded Visa cards, transfers and payment links, powered by licensed partners.
Build it
Create your own financial platform.
Pick a template, name it, brand it, preview every page before you pay. Your brand, your users, your fees.
Build my platform →Questions people ask
How much will my overdraft cost?
Work out the interest and fees for the days you are overdrawn.
Overdraft cost calculator →E-money institution vs bank?
Why e-money accounts work differently from bank accounts.
E-money vs bank →Can I launch my own money app?
Yes, with a branded platform powered by licensed partners.
See platforms →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.