An overdraft is the agreed cash-borrowing limit that your bank will allow. Overdrawing your account is when you take out more money than you actually have in the account. It gives you a flexible way of managing your cash flow and can provide you with short term funds if you don't have enough money.

Most student bank accounts offer interest free-overdrafts – which means they don’t cost anything provided you stay within your limit. The length of your student overdraft is also important as you are more likely to be more reliant on this facility towards the end of your degree.

Info about overdrafts

1. Ideal for borrowing money short-term, when you know it will be replaced quickly (ie: when your wages or student loan is paid into the account)
2. Not a good value in the longer term when you are borrowing huge sums of money or are attempting to clear your debts.
3. The overdraft usually increases as you progress through university
4. You must agree an overdraft limit before attempting to become overdrawn; this is called an authorized overdraft
5. If you exceed the amount set by the bank, you will have to pay bank charges (This area is currently being examined in the High Court)
6. You may not get the massive overdraft that the banks are advertising
7. Find out the bank’s policy in relation to graduate overdrafts – some will allow the overdraft to continue for a year, others may introduce a charge 

I don’t need an overdraft

If you are likely to be in credit, then experts suggest choosing an account with a 0% overdraft and making use of this 'free' money to make money.  The idea is to take the free overdraft and place it in a high interest savings account .

This way you can earn interest on the bank's money and when you do need to repay the overdraft you can do so instantaneously.  If you don’t want to do this by opening a current account with an overdraft facility it is also possible to do this with your student loan.