Your salary lands and the balance is still negative. Not badly. Just the usual amount. If that sounds like your month, you are not using an overdraft any more. You are living in one. Here is what an overdraft is, what a bank may legally charge for one in South Africa, and how to get out once the limit has quietly become your zero.
What Is an Overdraft?
An overdraft is a credit facility linked to your bank account that lets you keep spending after your balance reaches zero, up to a limit agreed with the bank. If your limit is R10,000 and your balance is zero, the bank will still honour R10,000 of card swipes, debit orders and withdrawals.
It is borrowed money. Under the National Credit Act an overdraft is a credit agreement, in the same category as a credit card. The bank has to assess whether you can afford it before granting it, and it shows on your credit report. FNB, Absa, Standard Bank and Nedbank all offer one.
How Does an Overdraft Work?
An overdraft charges interest every day on the amount you are overdrawn, and adds that interest to your account once a month. Spend R4,000 below zero for ten days and you pay ten days of interest on R4,000. Bring the balance back above zero and the interest stops.
Three things make it different from other credit:
- There is no instalment. Nothing forces the balance down. Your salary reduces it, your spending takes it back up.
- There is no end date. A personal loan finishes. An overdraft runs until you or the bank closes it.
- The limit belongs to the bank. Under the terms of the facility the bank can review, reduce or withdraw it.
What Does an Overdraft Cost in South Africa?
An overdraft may cost at most the repo rate plus 14% a year in interest, which is 21.25% with the repo rate at 7.25% since 25 September 2026. That cap comes from the National Credit Act regulations for credit facilities. Many banks price below it, so check the rate on your own statement. We explain how the repo rate feeds into your debt in interest rates explained.
Two fees can be added to the interest:
- An initiation fee when the facility is opened: R165 plus 10% of the limit above R1,000, capped at R1,050 before VAT.
- A monthly service fee of up to R69 including VAT.
Here is what the maximum rate looks like in rands if you sit at the same overdrawn balance all year.
| Average overdrawn balance | Interest a month at 21.25% | Interest a year | Year with the R69 service fee |
|---|---|---|---|
| R5,000 | R89 | R1,063 | R1,891 |
| R20,000 | R354 | R4,250 | R5,078 |
| R50,000 | R885 | R10,625 | R11,453 |
Look at the middle row. R5,078 a year, and on 31 December you still owe the R20,000. The figures are illustrative: the legal maximum rate, a steady balance, before any initiation fee.
What Happens If You Go Over Your Overdraft Limit?
If a payment would take you past your limit, the bank can refuse it. A debit order is then returned unpaid. The bank may charge a fee for the returned item, and the company you were paying may add its own. The missed payment is also the start of arrears on that other account, whether it is a store card, a policy or a car instalment.
This is how an overdraft problem spreads. One short month at the limit can put two or three other accounts behind, each with its own fees. If your debit orders are bouncing, treat it as urgent and deal with it this month.
Overdraft vs Credit Card vs Personal Loan
An overdraft and a credit card carry the same maximum interest rate, and a personal loan may legally cost more. The real difference is how each one gets repaid.
| Overdraft | Credit card | Personal loan | |
|---|---|---|---|
| Maximum interest (2026) | 21.25% | 21.25% | 28.25% |
| Interest starts | The day you go below zero | After the interest-free period, if the card has one and you pay in full | The day the loan pays out |
| Monthly repayment | None required | A minimum payment | A fixed instalment |
| When it ends | When you or the bank closes it | When you or the bank closes it | On the last instalment |
A personal loan is the most expensive of the three on paper and the only one built to end. That is the trade. If you want the detail on the other two, see our guides to paying off credit card debt and personal loans in South Africa.
When Is an Overdraft the Right Tool?
An overdraft is the right tool for a short gap that your next salary will close in full. A geyser bursts a week before payday. A client pays late. You dip below zero for a few days, pay a few rand in interest, and you are back in credit. Used like that it is cheaper and quicker than a new loan, and far cheaper than a payday lender.
The test is simple. In the last six months, how many did you finish with a balance above zero? If the answer is most of them, your overdraft is doing its job. If the answer is none, read on.
The Permanent Overdraft: When the Limit Becomes Your Zero
A permanent overdraft is one where your salary never lifts the balance above zero, or lifts it for only a few days. The facility was sold as a cushion for the odd tight week. Used that way it works. The trouble starts when the cushion is the floor.
You are living in your overdraft if:
- Your balance is negative on the day before payday, every month
- You think of the available balance, limit included, as your money
- You have accepted a limit increase to make room
- You have taken another loan to bring the overdraft down, and it went back up
Relying on an overdraft every month is one of the warning signs of a debt trap. Higher earners are more exposed here than they expect, because the limits banks grant grow with income. A R50,000 overdraft that never clears costs more each year than many people owe in total.
What we see when people ask us for help
An overdraft is seldom the only debt. The typical person who asks us for help has 4 credit accounts with 3 different lenders, and 29.3% have six or more.
One in four (25.3%) are still up to date on every account when they ask. You do not have to be in arrears to have a problem worth solving.
Source: Debt Solutions 4U applicant data, 2026. Based on 3,920 credit reports pulled through Debt Solutions 4U, June to October 2026. Our figures do not separate overdrafts from other credit. These are people who asked for help, not all account holders.
How to Get Out of Your Overdraft
You get out of an overdraft by lowering the limit in steps, so the balance has nowhere to climb back to. Paying it down without touching the limit rarely lasts.
- Find your real number. Take the lowest balance of each of the last three months. That is how much of the overdraft you are actually living on.
- Turn off limit increases. Tell the bank in writing that you do not want automatic increases.
- Step the limit down. Ask the bank to cut the limit by a fixed amount each month, even R500. A smaller limit is a repayment you cannot undo on a bad day.
- Ask about converting it. Some banks will move an overdrawn balance to a fixed-term loan. Compare the rate and the fees before you agree, and close or reduce the overdraft on the same day.
- Do not clear it with a short-term loan. A payday loan to settle an overdraft swaps the cheaper debt for the dearer one.
If the numbers do not work, check them properly. Our debt-to-income calculator shows what share of your pay already goes to debt.
What Happens to an Overdraft Under Debt Review?
An overdraft can be included in debt review, where the facility is frozen and the overdrawn balance is restructured into one monthly repayment with your other debts. Frozen means you can no longer draw below zero. For someone whose month depends on the overdraft that takes planning, which is why we cover it in debt review and your bank.
Debt review is a process under Section 86 of the National Credit Act for people who are over-indebted, meaning they cannot meet all their debt repayments and still cover living costs. It is not for everyone with an overdraft. If a stepped-down limit and a tighter month will fix it, do that. If the overdraft is one of several debts you cannot keep up with, an NCR-registered debt counsellor can assess whether you qualify. You can also run your own figures through our debt review calculator or start on the Debt Solutions 4U homepage.
Reviewed by a registered debt counsellor, NCRDC2423
Frequently Asked Questions
What is an overdraft in simple terms?
An overdraft is a credit facility attached to your bank account that lets you keep spending after your balance reaches zero, up to a limit the bank has agreed. If your limit is R10,000 and your balance is zero, you can still spend R10,000. You pay interest on whatever amount you are overdrawn, for every day you are overdrawn.
How much interest is charged on an overdraft in South Africa?
Under the National Credit Act an overdraft is a credit facility, and the maximum interest rate is the repo rate plus 14% a year. With the repo rate at 7.25% since 25 September 2026, the maximum is 21.25%. Your bank may charge less, depending on your credit profile. On top of interest, a bank may charge an initiation fee capped at R1,050 before VAT and a monthly service fee of up to R69 including VAT.
Is an overdraft better than a credit card?
The maximum interest rate is the same for both, because both are credit facilities under the National Credit Act. The differences are in how they work. An overdraft charges interest from the first day you are overdrawn. Most credit cards give an interest-free period on purchases if you pay the full statement balance. A credit card has a minimum monthly payment; an overdraft has none, which is why a balance can sit there for years.
Does an overdraft affect your credit score?
An overdraft is a credit agreement and appears on your credit report. Staying inside your limit is not a missed payment. Going over the limit, or failing to bring the account back within the limit when the bank asks, can be reported as arrears. A facility that is used to the limit every month also adds to the total credit a new lender sees you relying on.
Can an overdraft be included in debt review?
Yes. An overdraft is a credit agreement under the National Credit Act, so it can be included in debt review with your other debts. The facility is frozen, which means you can no longer draw below zero, and the overdrawn balance is restructured into your single monthly repayment. A registered debt counsellor first has to assess whether you are over-indebted.
