Where to find the cheapest overdraft

%VIRTUAL-SkimlinksPromo%Fee-free overdrafts are a handy way to temporarily borrow money. Here are the top ones right now.

If you can open a current account with a free or low-cost overdraft it can be a cheap way of borrowing some extra money to tide you over until payday.

It's also cheaper than risking going over a credit card limit or, even worse, taking out a pricey payday loan.

Cheap overdrafts

The price you pay for an overdraft can vary widely. So before you sign up to a new account check the small print, including any charges.

Switching current accounts is now easier, thanks to the seven-day switch rule change, so if you're stuck in an account with a high interest rate, or small overdraft, it's worth changing.

This can be cheaper than taking out a loan or spending on your credit card but will depend on your credit rating and the size of the overdraft you want.

Most overdrafts will have an authorised amount you're allowed to dip into if you get short. This could be free, charge a daily sum or have an overall interest rate. If you go into an unauthorised overdraft the charges will be a lot higher.

The best current accounts for free overdrafts

In order to decide which current account is cheapest for you, here I've detailed some of the best around.

Nationwide FlexDirect

There are no interest charges for an authorised overdraft for the first year with the Nationwide FlexDirect current account. When this period ends it's a steep 50p per day fee on overdrafts over £10 and if you go into an unauthorised overdraft it is £5 a day, capped at £60 a month.

When you're back in the black, this account pays 5% in-credit interest on up to £2,500 for a year when you pay in at least £1,000 per month.

Santander 123 account

If you're in need of a temporary boost the Santander 123 current account has a fee-free overdraft for four months. Santander quotes an average overdraft limit of £1,200. After the initial free period there is a charge of £1 per day, capped at 20 days per month (though this cap is being removed from 19th August 2014)

To qualify for this you'll need to put at least £500 a month into the account and set up two direct debits. There's also a monthly fee of £2 to be aware of but you can earn up to 3% cashback on your monthly direct debits.

The Santander Everyday current account offers the same overdraft facility.

First Direct 1st account

First Direct offers a fee-free overdraft of £250 which is a good buffer if you often run out of money by the end of the month. If you go over this amount the bank will charge 15.9% interest.

To qualify for the overdraft you'll need to put in at least £1,000 per month. The bank will pay you £100 for switching to it as your main current account.

M&S Bank

M&S may be a recent entry to the banking world but its current account, designed primarily for shoppers at the store, has a fee-free overdraft of £100.

After this point a charge of 15.9% interest will kick in up to the overdraft limit of £500. The account is designed for regular shoppers at Marks & Spencer, so you can earn loyalty points when you shop with your debit card. There's also a £100 M&S gift card as a welcome bonus.

Cheap overdraft accounts

Most current accounts will offer an overdraft in return for a fee. If you're paying to borrow the money the amount will be higher. However, it's important to check the fees before you dip in as it can be an expensive way to borrow money.

Go for an account with a low interest rate, such as the Clydesdale Bank or Yorkshire Bank Current Account Direct accounts, which both have overdrafts with an interest rate of 9.9%.

This will be cheaper than borrowing on a credit card, as most standard interest rates for borrowing on credit are nearer to 15%.

Other options for debt management

The first step you should take is to cut back spending where you can and make a proper budget and stick to it. But if you're in serious trouble with your finances the best thing to do is speak to a free and confidential debt advice charity. Find out more in Where to get free debt advice.

See if you can switch to a better current account