Overdrafts Explained: What They Are and How to Avoid Them
Okay, let’s be real—banking terms can sound super confusing. One minute you're checking your balance, the next you're hit with something called an overdraft fee, and suddenly your account is in the negative even though you thought you had enough money.
If you've ever wondered, “Wait, what is an overdraft?” — you’re not alone.
This guide is for you: a clear, simple breakdown of what overdrafts are, how they happen, and most importantly, how to avoid overdraft fees that can drain your account faster than your favourite streaming subscription.
So, What Is An Overdraft
An overdraft happens when you spend more money than you actually have in your bank account.
Let’s say you have £10 in your account, but you spend £15 on a food delivery app. That extra £5 doesn’t just disappear—it’s borrowed from the bank. And guess what? Banks usually charge you a fee (sometimes more than the amount you overspent!) for covering that cost.
Some accounts offer overdraft protection—which is basically the bank agreeing to cover you temporarily—but it often comes with terms and interest, especially with current accounts for older teens or adults.
How Overdrafts Affect You As A Teen
If you’re using a teen current account, chances are your account may not even allow you to go into overdraft, which is a good thing!
But if you're 18+ or using an account linked with a parent or guardian, the bank might allow it—and that’s where the danger starts.
Why overdrafts can mess up your money:
You could be charged daily or monthly fees.
It creates a habit of spending money you don’t have.
It can mess up your budgeting.
If unpaid, it could affect your credit score later on.
Common Ways Teens End Up in Overdraft
Forgetting about automatic payments or subscriptions
Spending money before a deposit clears
Not checking your balance regularly
Assuming you have more money than you actually do
Sound familiar? You’re not alone—and you’re definitely not doomed.
How To Avoid Overdrafts
Here are some smart, totally doable tips to keep your account in the clear:
Use a banking app
Most teen banking accounts have apps that send balance alerts, so you always know how much money you’ve got.Turn off auto-pay for subscriptions
Things like music streaming or gaming services can sneak up on you if you forget the renewal date.Stick to a spending limit
Set a weekly limit for your spending—and track it like you would a daily step goal.Start a mini savings buffer
Even keeping £10 in your account “just in case” can save you from going into the red.Use a prepaid card
These don’t let you go into overdraft at all, making them a great choice for younger teens.
“Teens who learn how overdrafts work early on are more likely to develop responsible banking habits that last into adulthood. The key is understanding your balance and never spending money you don’t have.”
Final Thought
Overdrafts aren’t something to panic about—but they’re definitely something to avoid. They’re like sneaky little traps that charge you money for spending money you didn’t really have. But with some smart habits (and the help of your banking app), you can dodge them completely.
So next time you’re about to tap your card, ask yourself: “Do I actually have enough for this?”
That one question could save you from fees, frustration, and future stress.
Money Saving Expert is a journalistic website that aims to provide the best MoneySaving guides, tips, tools and techniques for people of all ages.
