One of the facilities you should be looking at when considering different current accounts is exactly what type of overdraft facilities you can expect. Different providers will offer varying amounts and you will want to select an account that has an allowance that is suited to your needs.
On my current account, how do I manage my overdraft?
However, it is important to remember that an arranged overdraft should be used not as a credit facility, but instead as a buffer for your account when you need a little financial help over the course of the month.
One particular type of consumer which may place particular emphasis on having such a function available to them would be students. As with all types of user, this particular group should exercise a level of care with their overdraft to ensure they are able to pay it back when required. Therefore, the attitude you have towards your overdraft limit will be very important once you have one in place, as although these are designed to help when you are short of cash, it is not free money and will eventually need to be repaid.
Keep in mind all direct debits and outgoings
The key to successfully managing your overdraft is to all of keep this in mind and remember that the function is part of the same current account that probably allows you to manage your day-to-day finances. Direct Debits, standing orders, cheques and card payments may also form part of this particular account, so making sure it is never too far in the red would be wise.
In general, your bank account allows you to manage how your money is spent and as such the overdraft can play a big part. It is therefore important to put a budget in place so you can see where your money is going and where changes can be made to improve your financial health. If you find you are spending too much time with a negative number on your account, perhaps it is time to reconsider your monthly expenditure – which could mean switching to cheaper utility providers or just generally altering your lifestyle.
If you’re typically the type of person who stays in credit, you may an overdraft is not something you will ever need, but having the option there might just come in handy when you least expect it. Some providers allow you to apply for an overdraft online, over the phone or in one of their branches if you prefer. You will find that for the most part, once an agreed a limit has been set, you will not incur charges. But should you breach this allowance you may find yourself open to daily charges until the money is repaid. Of course, there might also be authorised overdraft interest rates you need to consider, but again this depends on the individual account. So, as ever, checking the terms and conditions are very important.
Finally, your eligibility for an overdraft may be dependent on a number of things.
The first of these might be how your account has been managed in the past, while another might be your general credit history. But many banks will also ask that a certain amount is paid into the facility on a monthly basis. This could be anything from £500 to £1,000 depending on the provider and what kind of limit you are looking at. In addition, if this level of input is not maintained you may find that you lose the feature.