What Does ‘In Debit’ Mean? A Guide to Bank Accounts, Bills and Overdrafts

If your bank account is in debit, your balance is below zero and you owe the bank money.

If your energy bill is in debit, you have paid less than the cost of the energy you have used.

Whether you see “in debit” on your bank statement or energy bill, the meaning depends on the type of account. A bank account that has a negative balance is referred to as being “in debit”, which means you owe the bank because you have used an overdraft. An energy or utility bill that shows “in debit” means you have consumed more energy than you have paid for, leaving you owing the energy company money.

The terms “debit” and “credit” can be confusing because their meanings depend on the type of account.

In Debit vs In Credit

Why does “debit” feel backwards on a bank statement?

It can seem backwards because your bank statement is written from the bank’s perspective. Money you deposit is money the bank owes you, so it is recorded as a credit on the bank’s books. When money leaves your account, the bank’s liability to you falls, so it is recorded as a debit. This is why a payment going into your account can be called a credit, while money leaving it can be called a debit.

What Does ‘In Debit’ Mean on a Bank Account?

If your bank account is in debit, it usually means you have spent more money than was available in your account, resulting in a negative balance.

For example, suppose you had £100 available to spend and made payments totalling £130. If your bank approved the payments using an arranged overdraft, your account would be £30 in debit. In other words, you owe the bank £30.

An arranged overdraft is an overdraft facility agreed with the bank before you exceed your available balance. An unarranged overdraft occurs when you exceed your available balance without previously agreeing an overdraft limit with your bank.

A debit transaction is different from an account being in debit. A debit transaction simply means money has been taken from your account, while being in debit means your account has a negative balance.

What Does ‘In Debit’ Mean on a Bill? 

An energy account that is “in debit” means that the amount you have paid towards your energy is less than the actual cost of the energy you have used.

For example, suppose you have paid £500 towards your electricity and gas, but the actual cost of the energy you used is £650. Your energy account would therefore show a debit balance of £150.

Being in debit does not necessarily mean that you have missed a monthly payment. Many energy suppliers use regular monthly payments based on estimated annual consumption. Your account can therefore fluctuate between debit and credit depending on your actual energy usage.

Being “in debit” is also different from paying by Direct Debit. Direct Debit is a payment method that allows a company to collect money from your bank account automatically; it does not mean that your account is in debit.

If your energy usage exceeds the estimated amount, your account may move into debit. If you later pay more than the cost of the energy you consume, the account may return to credit.

In Debit vs Overdraft

“In debit” describes the state of your bank account when it has a negative balance. An overdraft is the facility that allows you to spend more money than you have available, creating that negative balance.

What Should You Do If You Are in Debit?

• For a bank account, check your balance and find out how much you owe. Also check whether any fees or interest are being charged.
• Pay money into your account to reduce or clear the negative balance. This is primarily a short-term liquidity issue which involves having enough available funds to meet your payments, rather than necessarily a sign of insolvency. 
• For an energy account, check your latest bill to find out what you owe and whether your balance was based on an actual meter reading or an estimate.
• If the energy account remains in debit, you may need to make an additional payment or ask your supplier whether your regular monthly payment should be adjusted.

Does Being in Debit Affect Your Credit Score?

Using an overdraft can appear on your credit file and may affect your ability to obtain credit, particularly if you regularly rely on it or fail to repay it. Energy accounts generally do not affect your credit file simply because they are in debit, but missed payments, defaults or energy debt passed to a collection agency can affect your credit record and future credit applications.