Line of credit vs overdraft

Line of credit or overdraft? We look at the features to help you choose the one that's right for you.

Personal lines of credit and overdrafts are both flexible and convenient financing alternatives to standard personal loans and credit cards. However, they share many similarities and are often thought to be the same product. In the guide below, we will explain what they are and how they differ so you can choose the option that is right for you.

What are lines of credit and overdrafts?

A line of credit is a personal loan that gives you access to a specified credit limit. It allows you to withdraw up to and including that limit.

An overdraft account is a special line of credit that's attached to your existing transaction account. You have access to a certain amount of credit that becomes available when you exhaust all the funds in your transaction account.

What are the main differences?

Line of creditOverdraft
CostsInterest rates vary, but you will only pay interest on your balance, not your credit limit. Establishment fees may apply.Overdrafts are unsecured, so variable rates generally apply. You will only pay interest on your outstanding balance, but you can expect monthly or annual fees on the account. An establishment fee may also apply.
Loan termYou generally have a choice between an ongoing line of credit, where you can keep the account open as long as it’s in good standing, or one with a fixed term, generally between one and five years.An overdraft account does not usually have fixed repayment terms. Your account will be ongoing as long as you keep making regular repayments.
Availability and accessEligibility criteria will vary, but lines of credit are generally available to those with good credit who can afford the repayments. Lenders generally provide a debit card that you can use to access your line of credit.You will need to be an existing account holder or looking to open a transaction account with the bank to open an overdraft. You can then access your overdraft automatically when your transaction account funds have been exhausted.

How to choose which one is right for you

If you’re wondering which of the two accounts will best meet your needs, you can ask yourself the following questions:

How and when will I need access to the funds?
A line of credit will give you access to funds when you need it, but an overdraft can only be accessed when your own funds have been used up. This is an important point to keep in mind.

Do I need an "emergency" account?
Overdrafts are typically thought of as “safety net” accounts. You'll only be charged interest on your overdraft account balance and will not be charged overdraft fees even if your account goes into the negative.

Compare different line of credit and overdraft products

Citi Ready Credit Offer

Citi Ready Credit


5.90 % p.a.

variable rate

  • Access a line of credit
  • 5.9% p.a. for up to 3 years (reverts to 19.99% p.a)
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100% confidential application

Citi Ready Credit Offer

A flexible line of credit up to $75,000 with flexible repayments. Receive a competitive introductory rate on the initial balance you transfer for three years.

  • Interest rate from: 5.90% p.a.
  • Interest rate type: Variable
  • Application fee: $199
  • Minimum loan amount: $5,000
  • Maximum loan amount: $75,000
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Rates last updated January 16th, 2019
Name Product Interest Rate (p.a.) Min Loan Amount Max. Loan Amount Application Fee Product Description
Citi Ready Credit
From 5.9% (variable)
Introductory variable rate of 5.9% p.a. applies for 3 years.
Get an introductory rate of 5.9% p.a. on your initial balance for 3 years. Standard rate applies after this period.
Westpac Flexi Loan
From 16.49% (variable)
You'll receive a variable rate of 16.49% p.a.
A convenient line of credit with limits from $4,000 that you can access 24/7.
St.George Get Set Loan Personal Loan
From 17% (variable)
You'll receive a variable rate of 17% p.a.
A line of credit up to $50,000 that offers no set repayment terms. Benefit from flexibility and 24/7 access to your funds.

Compare up to 4 providers

Rates last updated January 16th, 2019
Name Product Interest Rate (p.a.) Min Loan Amount Max. Loan Amount Application Fee Product Description
BankSA Overdraft
From 14.99% (variable)
The BankSA Overdraft allows you access to extra funds if you need it.
Bank of Melbourne Unsecured Personal Overdraft
14.99% (variable)
The overdraft option from Bank of Melbourne is a flexible revolving line of credit

Compare up to 4 providers

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Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 28.69% p.a. based on your risk profile.
Apply for a loan up to $70,000 and repay your loan over 3 or 5 years terms.

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You'll receive a fixed rate of 12.45% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants.

Citi Personal Loan Plus

You'll receive a variable rate between 8.99% p.a. and 17.99% p.a. (9.96% p.a. to 18.91% p.a. comparison rate) based on your risk profile
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RateSetter Unsecured Personal Loan - 3yr Fixed

You'll receive a fixed rate from 8.63% p.a. based on your risk profile
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