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What is an overdraft?

A bank overdraft is a line of credit that covers your transactions if your bank account balance drops below zero.

Note: Westpac no longer sells personal overdrafts.

Learn about our full range of available personal loans.

Bank overdraft definition

An overdraft facility linked to your everyday transaction account is an unsecured line of credit designed to cover short-term cash flow shortfalls.

When would I need an overdraft?

We've all been there, when the bills are due and payday hasn't come around yet. Overdrafts come in handy when you need to proactively manage these common cash flow situations.

Where an overdraft facility is not arranged in advance, banks charge what is known as an “overdrawn fee” when your balance goes below zero.

Benefits of a bank overdraft

An overdraft allows you to access extra funds through your transaction account up to an approved overdraft limit, avoiding overdrawn and dishonour fees.

Interest is only charged on the amount overdrawn (when fees and charges are paid on time). A monthly loan account fee may also be charged, depending on the type of overdraft you choose.

You can make withdrawals using your overdraft in all the usual ways, including at an ATM, in branch, Debit Mastercard, BPAY®, Online, Mobile, Telephone and EFTPOS.

Overdrafts don't have a set repayment schedule, allowing you to decide when you want to make a repayment, for example, when your salary is credited to your account.

You should also carefully consider the overdraft limit you apply for to avoid overspending.

Credit criteria, terms and conditions, fees and charges apply.

Types of bank overdraft

At Westpac, we offer two types of overdraft for personal use:

  • Personal Overdraft - Currently not for sale
  • Temporary Overdraft - Currently not for sale

When is a bank overdraft not the best option?

Overdrafts are useful for covering short-term cash flow short-falls. However, they are not suitable for consolidating debts. Learn more here about debt consolidation.

Things you should know

Westpac Debit Mastercard® Terms and Conditions (PDF 3MB)

BPAY® is a registered trademark of BPAY Pty Ltd ABN 69 079 137 518.