Janice Lozano
NatWest offers Student Overdrafts of up to £2,000, which can be increased to £3,250 for students in their third year onwards. These overdrafts are interest-free and do not have a payback date, but they are considered a form of debt and are repayable on demand. Students can remain in their 0% interest overdraft for two years after graduation, with the interest-free limit decreasing each year. NatWest offers a text alert service to notify customers when they are about to go into an unarranged overdraft, which occurs when spending exceeds the account balance or the arranged overdraft limit. To pay off an overdraft, customers simply need to ensure a positive balance in their account, and NatWest recommends setting monthly targets to improve credit ratings.
| Characteristics | Values |
|---|---|
| Types of Overdrafts | Arranged and Unarranged |
| Interest | Charged on both types of overdrafts |
| Repayment Date | None |
| Credit Score Impact | Staying within overdraft limit for long periods may negatively impact credit score |
| Maximum Student Overdraft | £3,250 |
| Minimum Overdraft Limit | £250 |
| Opt-out Alerts | Possible via Online Banking, mobile banking app, phone or in-branch |
| Overdraft Cost Calculation | Available via 'My Overdraft' section in the mobile app |
| Eligibility Check | Available before applying for an overdraft |
| Overdrawn Payment Deadline | 2.00 pm to avoid charges |
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What You'll Learn
Arranged vs unarranged overdrafts
There are two types of overdrafts: arranged and unarranged. Both types will cost you money in interest when you use them. An arranged overdraft is a form of debt and is repayable on demand. It is a convenient type of short-term borrowing that can provide a safety net on your current account. To get an arranged overdraft, you need to have a current account with the bank. You agree on an overdraft limit with the bank before your account goes overdrawn. This limit can be increased or decreased, but it is subject to a credit assessment. Arranged overdrafts are unlikely to have a major impact on your credit score as long as you don't go beyond your overdraft limit or have payments refused. In fact, if you use your overdraft wisely and pay it off regularly, it could improve your credit rating.
An unarranged overdraft is when you spend more money than you have in your account without having an arranged overdraft in place, or when you authorise a payment that would take your account beyond your arranged limit without agreeing in advance to an overdraft to cover it. Unarranged overdrafts may incur higher charges than arranged ones, and they can adversely affect your credit file. If you have an unarranged overdraft, you need to pay it off immediately.
NatWest offers interest-free student overdrafts of up to £2,000. The maximum student overdraft is £3,250. After graduation, the amount of the arranged overdraft that is interest-free reduces each year. In the first year after graduation, up to £3,250 will be interest-free; in the second year, only the first £2,250 will be interest-free; and in the third year, only the first £1,250 will be interest-free. NatWest offers text alerts to let customers know if they are about to go into an unarranged overdraft or have a payment rejected, so they can take action to avoid charges.
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How to improve your credit score
A credit score is a number that creditors use to determine your credit behaviour, including how likely you are to make payments on a loan. Having a high credit score can make it easier to get a loan, rent an apartment, or lower your insurance rate. Credit scores are based largely on how you manage credit accounts over time. The more experience your credit report shows with paying your loans on time as agreed with your lenders, the more information there is to determine that you are a good credit recipient.
- Make on-time payments: Payment history is the most important factor in calculating your credit score. Always make payments on time. If you're having trouble, set up autopay for at least the minimum due and create calendar reminders and alerts.
- Pay down balances: Keep your credit card balances low compared to your total credit limit. Experts advise keeping your use of credit at no more than 30% of your total credit limit. Paying off the balance in full each month helps get you the best scores and keeps your interest costs as low as possible.
- Avoid unnecessary debt: You don't need to carry a balance on credit cards to get a good score. In fact, you don't need outstanding debt at all. Avoid taking on more debt than is necessary just for the sake of building credit.
- Credit mix: Your credit mix will likely improve naturally over time as you apply for different types of credit to meet your financial needs. If you're just starting, consider applying for a starter credit card and a credit-builder loan.
- Length of credit history: The longer your credit history, the better. This is why it's important to start building credit early.
Additionally, it's important to note that an overdraft is considered a form of debt and can affect your credit score. NatWest offers an interest-free student overdraft of up to £2,000, which can be increased to up to £3,250 for students in their third year and beyond. This overdraft usually becomes a graduate account after graduation, with the interest-free limit decreasing each year. While student accounts typically don't incur interest on their overdrafts, it's important to check with your bank. Unarranged overdrafts, which occur when you spend more than your agreed limit, can affect your credit score and may need to be paid off immediately. Therefore, it's crucial to manage your overdraft effectively and ensure you have enough funds in your account to cover payments.
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Interest charges and how to track them
NatWest's student overdraft is interest-free, meaning you don't need to pay any interest or fees as long as you stay within your arranged overdraft limit. However, if you go into an unarranged overdraft, you may be charged interest, and there may be additional fees.
To track your interest charges, you can use the NatWest mobile app. Open the app and click on your chosen current account. Then, select "My Overdraft" to view your monthly interest charges. The app will also show you when any charges are due to come out of your account.
It's important to note that your charging period may not run in a calendar month but is based on when you get your current account statement. You're only charged interest for the days you're overdrawn in that period. Interest is calculated at the end of the business day, and charges are typically debited from your account 21 days after the end of your charging period.
If you want to estimate how much interest you'll be charged based on your circumstances and borrowing amount, you can use NatWest's Overdraft Cost Calculator. This tool can be accessed via the "My Overdraft" section in the mobile app or on the NatWest website.
Additionally, NatWest provides text alerts to help you manage your borrowing. These alerts will notify you if you're about to go into an unarranged overdraft or have a payment rejected, allowing you to take action and avoid unnecessary charges.
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How to set up text alerts
NatWest offers text alerts to help you stay on top of your student overdraft. If you have provided NatWest with your UK mobile number, you will be automatically enrolled in the text alert service.
If you have an arranged overdraft, you will receive a text when you start using it, for example, after a cash withdrawal. You will also be notified if you are about to use your arranged overdraft, for instance, due to a scheduled payment.
You will also receive unarranged overdraft Act Now Alerts. These alerts will notify you if you are about to go into an unarranged overdraft or have a payment rejected. This will allow you to take action to ensure payments are made and avoid charges. If NatWest is unable to notify you in advance, you will receive a text the next day.
You can opt out of or amend these alerts using Online Banking, the mobile banking app, or by speaking to a NatWest representative over the phone or in-branch.
Additionally, you can set up balance alerts to be notified when your account goes above or below a specific amount. NatWest will check your account at 6 am each day and aim to send your balance by text around 8 am (10 am on weekends).
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How to budget and set targets
Budgeting and setting targets are crucial steps in managing your finances and paying off your student overdraft with NatWest. Here are some detailed instructions to help you with this process:
Understand the Basics: Arranged vs. Unarranged Overdraft
Firstly, it's important to understand the difference between an arranged overdraft and an unarranged overdraft. An arranged overdraft is a pre-agreed facility with your bank, allowing you to spend more than what's in your current account up to a set limit. This type of overdraft is considered a form of debt and is repayable on demand. On the other hand, an unarranged overdraft occurs when you spend beyond your account balance without an arranged overdraft in place or exceed your arranged overdraft limit. Both types of overdrafts can incur interest and charges, so staying within your arranged overdraft limit is essential.
Know Your Overdraft Terms
Check the terms and conditions of your NatWest student overdraft. Understand the interest rates, fees, and charges associated with your overdraft. Find out if there is a specific payback date or if it converts to a graduate account after graduation, which typically has a lower interest-free limit each year. Knowing these details will help you plan your repayment strategy effectively.
Create a Detailed Budget
Creating a budget is a powerful tool to manage your finances. Start by listing all your sources of income, such as student finance, part-time job earnings, or any other sources. Then, make a list of your expenses, including rent, groceries, transportation, and any other regular payments. Allocate your income to cover these expenses and try to live within your means. There are many budgeting apps and prepaid cards available that can help you track your spending and notify you when you're about to exceed your budget.
Set Clear Targets
Based on your budget, set clear and achievable targets for repaying your overdraft. Decide on a realistic timeframe for repayment and break it down into monthly or weekly goals. For example, if you have a £2,000 overdraft, you might set a target to repay £500 every month until it's cleared. Ensure you stick to your budget and targets by regularly reviewing your spending and making adjustments as necessary.
Explore Repayment Options
NatWest offers various options to help you manage your overdraft. You can apply to increase or decrease your overdraft limit, depending on your needs. If you're having trouble managing your overdraft, speak to NatWest about your options. They may be able to provide temporary relief or advise you on graduate accounts with more favourable terms. Additionally, consider seeking advice from debt organisations or financial advisors to explore other repayment strategies.
Remember, budgeting and setting targets are essential steps in gaining control over your finances. By following these instructions, you'll be well on your way to successfully paying off your NatWest student overdraft and developing valuable financial management skills for the future.
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Frequently asked questions
You can pay off a NatWest student overdraft at any time by ensuring you have a positive balance in your account.
You can use NatWest's overdraft cost calculator to estimate how much interest you are being charged based on your own circumstances and borrowing amount. You can access this via the 'My overdraft' section in the mobile app.
NatWest offers an automated overdraft text alert service, which will notify you if you've gone into your overdraft or if you are about to. You can also set up your own targets for how much you want to pay off each month and factor these into your budget.
