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HSBC and First Direct to offer £500 interest-free overdraft buffer to help with cost of living – here's what you need to know

HSBC and First Direct to offer £500 interest-free overdraft buffer to help with cost of living – here's what you need to know

HSBC and sister bank First Direct are giving current account customers a £500 interest-free overdraft buffer for a year, if they request it. The banks, which are part of the same group, say they hope to support those most in need of help with the rising cost of living. Here's what you need to know.

Currently, most HSBC current account customers get a £25 interest-free overdraft buffer, while many First Direct customers get £250 interest-free, with borrowing above these amounts charged at 39.9% EAR variable interest.

If you're struggling, see our Cost of living survival guide, which is full of useful tips on saving money.

The higher 0% buffer will only last for a year – after that, the rate reverts to 39.9%

The £500 interest-free buffer will only last for 12 months from the date it's applied to your account. After that, your overdraft charges will revert to the hideous standard rates of 39.9% on borrowing above £25 for HSBC and above £250 for First Direct. So try to repay what you've borrowed before this happens.

For help managing your overdraft, see our full Cut overdraft charges guide.

You can request the support online until 31 March 2023 – it's not automatic

The extra buffer is available for those with HSBC's Bank Account, Advance Bank Account, Bank Account Pay Monthly and Current Account and those with First Direct's 1st Account.

How you apply for the interest-free period depends on whether you currently have an arranged overdraft or not. An arranged overdraft is where you've agreed a limit with the bank in advance – you can normally apply for this when opening your current account or separately afterwards.

  • If you already have an arranged overdraft, you can request the support online. Just fill in either HSBC's online form or First Direct's online form, which will ask you for your contact details, current account number and sort code.

    If your arranged overdraft limit is over £500, only the first £500 will be interest-free – any borrowing above this will be charged at the usual interest rate of 39.9% EAR variable. If your arranged overdraft limit is less than £500, the whole amount will be interest-free, but your limit will stay the same (it WON'T increase to £500).

  • If you don't have an arranged overdraft, you'll need to apply for one first. Be aware that applying will trigger a 'hard' credit check, which will be visible to other lenders on your credit report and could have a negative impact on your ability to get other credit.

    To avoid wasting the application, use HSBC's eligibility checker or First Direct's eligibility checker before you apply to see if you're likely to be accepted. The eligibility check will have no impact on your credit rating. You can then apply for the HSBC overdraft online or call First Direct on 03456 100 100 to apply.

Your credit file won't be affected

HSBC and First Direct say requesting the temporary arranged overdraft support will not affect your credit file – unless you need to apply for an arranged overdraft in the first place (or increase your existing limit).

However, it's worth noting that your credit file may be affected if you go into an unarranged overdraft – this is where you go overdrawn without having an agreed overdraft limit with the bank, or where you exceed that limit. So try to avoid this where possible.

HSBC customer? Consider switching to First Direct

As noted above, in addition to the temporary £500 buffer, the First Direct 1st Account offers many a permanent £250 interest-free overdraft (use its eligibility checker before applying). Above that, it's 39.9% EAR variable interest.

Plus, if your HSBC account was opened before January 2019 and you don't already have a First Direct account, you can currently get £175 for switching. See First Direct switching info.

Already a First Direct customer, or need a bigger buffer over the next year?

Nationwide's FlexDirect account offers some newbies a decent-sized 0% overdraft as you can get up to £1,500 (use Nationwide's overdraft eligibility tool to get an indication before you apply) – but it's only 0% for a year. After that, it's 39.9% EAR variable interest. Plus, it currently pays switchers £200 – see Nationwide switching info.

For more options, see our Best bank accounts guide.

We've asked other major banks including Barclays, Lloyds, NatWest, Santander and TSB whether they'll also be offering higher 0% overdraft buffers for their current account customers due to the cost of living crisis and we will update this story when we know more.

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