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Learn more about bank accounts

Think of an overdraft as extra money you can draw on in times of need. An overdraft works by allowing you to withdraw more money than what’s available in your bank account.

There are different types of overdrafts available – but in this instance, we’re referring only to overdrafts associated with personal (not business) transaction accounts.

An overdraft is essentially an unsecured line of credit. It’s similar to a credit card in that the credit amount is limited (or capped) and a variable interest rate is applied to the credit used. 

However, overdrafts are a popular alternative to credit cards because they are attached to your day-to-day transaction account and don’t require additional PINs, cards or separate statements.

You might have experienced at one time a sinking feeling at seeing your bank balance in arrears. An overdraft can give you peace of mind (and take care of cashflow issues) by being on standby.

Most major banks and financial institutions offer personal overdrafts via a simple application process. You will need an existing transaction account beforehand.

How do I apply for an overdraft?

The application process for an overdraft is simpler than applying for a credit card. You can apply online through your existing financial institution, or shop around for an overdraft that appeals.

As with any credit product, there are credit assessment criteria that you may need to meet. However, it’s not as strict as the criteria applicable to larger loans such as mortgages.

In general, the eligibility criteria for overdrafts could require that you:

  • Are at least 18 years old
  • Have a regular income
  • Are an Australian citizen, permanent resident or have a valid visa

When applying, ensure you have some form of identification on hand, your tax file number, your bank account information, and any income, employment and financial commitment details.

Is there a credit limit for an overdraft?

The limit for an overdraft can be as low as a few hundred dollars and can go as high as $50,000 or more. Overdrafts limits can be capped or based on an agreed value.

Your overdraft limit will depend on how much you want, your affordability, and/or your income. Different overdraft products will also have different variable interest rates, and fees and charges. 

It’s important to ensure your negative balance doesn’t exceed the agreed terms (or your overdraft limit). Additional fees may be charged and higher interest rates may apply if this occurs.

The benefits of a bank account overdraft

  • No set repayments
  • Only pay interest on the credit used
  • No or low monthly service fee
  • Competitive interest rate
  • Easy access to extra funds
  • Linked to your transaction account

In addition to the benefits listed, the real value of an overdraft is that it’s attached to your transaction account. That means you can access credit the same way you would withdraw money.

You could make withdrawals using your overdraft in all the usual ways, including at an ATM; in a branch; BPAY; online, mobile or phone banking; and via EFTPOS.

Frequently asked questions

Do you need a bank account to sell on eBay?

You don’t need a bank account to sell on eBay. But if you don’t have a bank account, you must provide either a credit card or debit card.

How can I wire money to a bank account?

You can wire money to an Australian bank account either through your own bank or by using a money transfer company such as Western Union or MoneyGram. Either way, you’ll need the other person’s name, BSB number and account number. If you use a money transfer company, you might also need to provide the recipient’s address for large payments.

Which bank is best for business accounts?

Unfortunately, there’s no definitive answer to the question of which bank is best for business accounts. That’s because ‘best’ will differ from customer to customer, depending on their unique circumstances. These include not only your company’s financial position, but also its size, its age and the sector in which it operates. Another factor to consider is what features you want in a bank account. Your business may require different features than another business; and your business may require different features tomorrow than it does today.

The best thing to do is to thoroughly research the market before opening a business account. And when you do open an account, you should reassess your options every year or two, because the market moves quickly. A particular bank might offer the best account today, but be surpassed by one or several rivals tomorrow.

How can I deposit cash into my bank account?

The traditional way to deposit cash into your bank account is to go to a branch and give it to a teller. These days, many banks will allow you to make deposits through an ATM as well.

How do you open a bank account under 18?

If you’re under 18 and you want to open an Australian bank account, you will need your passport or birth certificate. (Some lenders might require just a Medicare card or driver’s licence.) You can apply online or at a branch. If you’re 13 or under, you will probably need a parent to accompany you to a branch.

How do you transfer money from PayPal to a bank account?

Transferring money from PayPal to an Australian bank account is simple. Just follow these three steps:

  • Go to your Wallet
  • Click ‘Transfer Money’
  • Follow the instructions

The money will take three to seven business days to reach your bank account.

Once you’ve made the transfer request, it can’t be withdrawn.

Can I have a PayPal account without a bank account?

You don’t need a bank account to send or receive money through PayPal. However, you do need a bank account if you want to withdraw money from your PayPal account.

Can you open a bank account at 16?

Yes, you can open a bank account at 16, or even younger. If you’re 13 or under, you will probably need a parent to accompany you to a branch.

How can you cash a cheque without a bank account?

You can cash a cheque without a bank account if you visit the bank that issued the cheque. For example, if somebody sends you a cheque from Bank X (as written on the cheque) and you visit Bank X, it’s likely that Bank X will let you cash the cheque – provided the person who wrote the cheque has enough money in their account. Bank X would probably charge you a fee for the service.

How do I overdraw my Commonwealth Bank account?

Overdrawing a bank account can happen by accident. It’s often hard to know what your balance is, particularly with direct debits, scheduled repayments and pending transactions competing for cash.

To avoid being stuck with a bank fee every time your account is overdrawn, you can apply for a personal overdraft. This will enable you to overdraw your account up to an approved amount.

A personal overdraft is connected to your CommBank Everyday Account, so you can enjoy easy access to extra funds once approved – anywhere from $100 up to $20,000.

Your overdraft funds can be accessed via your CommBank keycard or Debit MasterCard, or online through NetBank and the CommBank app.

To apply you can either call the Commonwealth Bank directly or visit your local branch.

Can you open another account at the same bank?

Yes, you can open another account at the same bank if you already have an account there, but some banks place a limit on how many specific accounts you can open.

Generally, though, it is possible to have more than one everyday account, one personal account and one joint account, or have different types of accounts – such as a transaction account and a savings account.

Keep in mind that some bank accounts come with fees, so you could be charged twice for having two types of the same account at the same bank.

Also, if you have more than one high-interest transaction account at the same bank, only one account will be able to earn the highest rate of interest.

Do you need a bank account to get a credit card?

To get a credit card, you need to show proof of income, which will almost certainly require you to have a bank account.

What do I need to open a company bank account?

To open a company bank account, you will probably have to provide 100 points of ID, an ABN and an ACN. You will probably have to provide the details of all signatories as well.

How do I close a bank account?

Closing a bank account is one of those tasks that’s easy to put in the too-hard basket. There are quite a few steps involved, some which may require you to hang on the phone for a while.  

Here’s a handy checklist of items to tick off, so the job gets done quicker. If you don’t do your banking online, the following steps can also be done at a branch.   

  • Cancel any scheduled or recurring payments
  • Update your direct debit details (such as loan repayments) with creditors
  • Export your payee address book (to keep a record of saved third-party bank account details)
  • Transfer the balance of your account (to the new bank account)
  • Close your account online, or by calling the bank or visiting a branch

How can I check my bank account balance online?

Checking your bank account balance online is a simple process. Once you’ve logged in to your online banking, clock on the relevant account and the balance should be visible.

How do you deposit change into your bank account?

One way to deposit change into your bank account is to visit a branch. Many lenders will also allow you to deposit your change through one of their ATMs.

Can foreigners open bank accounts in Australia?

Many Australian lenders allow foreigners to open bank accounts in Australia. Often, this can be done before you arrive in the country – with no Australian address required. When you get to Australia, you can pick up your debit card, using your passport as identification.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Can you get a payday loan without a bank account?

Yes. Some payday lenders are willing to transfer loans to prepaid debit cards instead of bank accounts.

Can I find my bank account number online?

Yes, you can find your bank account number by logging into your online banking and clicking on the relevant account.