Comparison · Borrowing & Debt · 2026/27
Overdraft vs Credit Card UK 2026/27
An arranged overdraft gives an automatic buffer built into your current account, charging interest (typically 20-40% EAR) from the moment you dip into it. A credit card, especially with a 0% purchase offer, can be far cheaper for planned spending repaid within the promotional term. This 2026/27 guide compares typical costs with a worked GBP 500 example.
Key facts -- 2026/27
- • Typical arranged overdraft EAR: ~20-40%, many banks ~35-40%
- • Interest-free overdraft buffer: often GBP 10-20 where offered
- • 0% purchase card promo period: commonly 6-24 months
- • Standard credit card purchase APR: often 20-30%+ after promo
- • GBP 500 for 1 month at 35% EAR overdraft: ~GBP 14-17 interest
- • Missed payment risk: both can affect your credit file
How Each Works
An overdraft is built directly into your current account -- you simply spend below zero up to your arranged limit, with interest applying (unless within an interest-free buffer) from the moment your balance goes negative. Since the FCA's 2020 reforms, overdraft pricing must be a single simple annual rate, ending the old system of higher unarranged fees.
A credit card is a separate line of credit with its own statement and minimum payment. Purchase interest normally applies from the transaction date unless you clear the full balance each month, or hold a 0% promotional offer, in which case no interest accrues on new purchases during the promo period.
Worked Example: GBP 500 Borrowed for One Month
| Option | Approx cost for 1 month |
|---|---|
| Arranged overdraft (~37.9% EAR) | ~GBP 15 |
| Standard credit card (~24.9% APR, no full clear) | ~GBP 10 |
| 0% purchase credit card, repaid in full within promo | GBP 0 |
| Within interest-free overdraft buffer | GBP 0 (up to buffer limit) |
Illustrative only -- actual rates vary by provider and individual pricing. Use the credit card payoff calculator to model your own repayment timeline.
Side-by-Side Comparison
| Factor | Overdraft | Credit card |
|---|---|---|
| Typical rate | ~20-40% EAR | 0% promo or ~20-30% APR |
| Best for | Brief, unplanned shortfalls | Planned spending, 0% offers |
| Repayment structure | Automatic as funds arrive | Minimum payment + statement |
| Approval basis | Affordability/credit check | Affordability/credit check |
| Visibility of debt | Less structured | Clear monthly statement |