Overdrafts: What you need to know about getting the right deal

Video: Simon Read tells you what you need to know about how to handle going into the red

A man withdraws money from a ATM machine of Laiki Bank in the Mediterranean city of Limassol on March 19, 2013. (BARBARA LABORDE | AFP | Getty Images)

If you go into the red it can be hugely expensive. Especially if you go overdrawn without telling your bank first.

But if you have the wrong current account you could end up paying hundreds of pounds more than you need to.

It means finding the right bank account is crucial to smart money management.

The right account depends on how careful you are with you cash – ask yourself, how often and by how much do you go overdrawn each month?

The key way to cut charges is to get an agreed overdraft with your bank and make sure you stick to it. Some even offer buffers which allow you to slip into an overdraft of say £100 without charge.

However the charges vary considerably. For instance, if you went £400 overdrawn for four days every month, in a year you'd be charged just £5.21 with one Yorkshire bank account.

But if you had a NatWest Select account, the cost - for going overdrawn for the same four days every month - would be £82.46. That's because the bank levies a £6 charge for every month you go overdrawn.

Finding a better account is simple - do your homework, compare the costs of each account compared to your financial habits and choose the one that will be cheapest.