An overdraft is a bank-provided service allowing you to spend more money than you have in your account, either through an agreed-upon (authorised) or unauthorised borrowing arrangement, typically incurring associated fees and interest. Canstar explores what overdrafts are currently available.
What is an overdraft?
An overdraft is a credit facility offered by a bank. It lets you spend more money than you have in your account. In return, you pay interest on the money you borrow and, usually, an account fee. You can arrange an overdraft facility, and credit limit, with your bank.
If you withdraw more money from your account than you have funds – either accidentally, or due to poor money management – without prior approval from your bank, you will be charged a higher interest rate. You could also be charged an unauthorised overdraft management fee, depending on your bank.
Which banks offer overdrafts?
| Overdraft Interest Rates and Fees | ||||||||
|---|---|---|---|---|---|---|---|---|
| ANZ | ASB | BNZ | Heartland Bank | Kiwibank | The Co-operative Bank | TSB | Westpac | |
| Interest rate | 18.9% | 19.5%* | 19.95% | 10% | 16.9% | 17.5% | 15.39% | 19.95% |
| Unauthorised overdraft rate/fee | 18.9% | 22.5% | 23.7% | 10% | 22% (5% tertiary rate) | 22% | 22% | $9/month |
| Application fee | $0 | $25 | $30 | $0 | $0 | $25 | $0 | $0 |
| Overdraft limit increase fee | $0 | $0 | $0 | $0 | $0 | $15 | $0 | $0 |
| Management fee (monthly) | $3 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Exceeding overdraft limit rate/fee | 27.9% p.a. | $3/month | $4/month | 16% p.a. | $10/month | $10/month | 20.39% p.a. | $9/month |
* 0% interest + no application fee for tertiary and graduate accounts
How to apply for an overdraft
To apply for an overdraft, you first need to meet your bank’s criteria, which typically includes:
- Be at least 18 years old with a regular income
- Have your main source of income directly credited to the account you wish to overdraft
- Supply your last 90 days of bank statements
- Be a New Zealand citizen or permanent resident, or be in New Zealand and have the right to work for at least two years
- Have a good credit history
Typically you can apply for an overdraft by visiting your local branch or by calling directly. An application fee may be required.
Please note that your bank may have different criteria or application process and this is intended as a guide only.
Is an overdraft right for me?
An overdraft can be a helpful tool for managing short-term financial gaps if used responsibly and infrequently. However, relying on it as a regular source of credit can become costly. It’s crucial to weigh the pros and cons and explore other financial options before getting an overdraft.
Everyday and savings accounts
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About the author of this page
This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.
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