Don't make the same mistake as the Department for Communities and Local Government; if you need to dip into the red, make sure it's authorised!
The Department for Communities and Local Government (DCLG) has been fined £20,000 by the Treasury, after it emerged the department ended the financial year £217 million overdrawn.
The DCLG, which has agreed to another 10% budget cut for the 2015/16 financial year, clearly needs to get a little bit better at budgeting.
In comparison to the size of the overdraft, the fine is pretty small; it works out at 0.009% of the balance. If you or I go into an unauthorised overdraft, as Eric Pickles and his team has, we can expect a far more significant punishment. Even with an authorised overdraft, chances are you’ll pay more than that.
However, there are some accounts which don’t punish you for going overdrawn. Perhaps Mr Pickles should have a chat with the following banks to see if they can sort out an account for his department…
Halifax
With the Current Account, Reward Current Account and Ultimate Reward Current Accounts from Halifax you can get a six month fee-free overdraft. After the six months has finished, each of the accounts charges £1 a day for planned overdrafts up to £2,000.
You’ll also get a £100 welcome bonus as soon as you begin your application, though this offer is due to end on 7th July.
I’m a big fan of the Reward account, as it pays you £5 each month so long as you pay in £750 a month and move over two direct debits. It doesn’t matter if you finish the month with nothing in your account, you’ll still get that cashback!
Santander
The 123 current account from Santander offers a fee-free arranged overdraft for the first four months you have the account. Exactly how much you get depends on your circumstances.
After the four months is over you will be charged £1 a day, capped at 20 days (so £20) in a monthly statement period.
The account is also a great option if you’re going to be in credit, as it pays 1% interest on balances of £1,000+, 2% on balances of £2,000+ and 3% on balances from £3,000 to £20,000. The 123 current account also pays cashback on certain direct debits, though it will cost you a monthly fee of £2.
[SPOTLIGHT]Santander also offers the Everyday current account, a simple account which also offers a free arranged overdraft for four months.
Barclays Bank Account
The Barclays Bank Account allows you to essentially build your own packaged current account, as you can add selected ‘Packs’ to your account. For example for £6 per month there’s the Home Pack, which includes satellite and TV equipment cover, a PC troubleshooting service and a legal and tax helpline, while the Travel Pack includes European family travel insurance and RAC breakdown cover for £8.50 a month.
If you add a pack to your account, then you’ll get 0% interest on the first £200 of your overdraft.
Nationwide
The FlexPlus account from Nationwide not only pays 3% on your balance up to £2,500. It also comes with a three-month fee-free overdraft, with a £100 fee-free limit after that.
You also benefit from commission-free cash withdrawals abroad. However, this account does cost a £10 monthly fee.
There’s also the free FlexDirect account, which pays a whopping 5% on balances up to £2,500 for the first 12 months and comes with a 12-month fee-free overdraft. After that you’ll be charged 50p per day.
Finally, there’s the free FlexAccount, which offers a three-month interest-free overdraft.
First Direct 1st Account
The 1st Account from First Direct wins every award going for customer service, but it’s also an option if you need an overdraft. You get an automatic £500 overdraft when you open the account, and the first £250 is interest free.
You’ll also get £100 for opening the account and a further £100 if you choose to leave after a year, subject to some terms and conditions.
To get the 1st Account free you need to pay in at least £1,000 a month or have another first direct product.
Co-op Current Account Plus
The Current Account Plus from the Co-operative Bank comes with a fee-free £200 overdraft. To get it you’ll need to pay in £800 every month.