Avoid Bank Overdraft Charges
An overdraft is a type of loan that is provided by banking institutions. In this type of loan, the depositor is allowed to borrow money using his current bank account. Although overdrafts are very convenient, this should only be used for short tern financial concerns rather than a long term financial solution. If you would like to avail of your bank’s overdraft loan products, make sure that you review loan terms before you sign up to prevent bank overdraft charges.
What are bank overdraft charges?
There are two types of overdraft: arranged and unarranged. An arranged overdraft is a type of overdraft where there is a set limit on your loan. This limit will allow you to spend more than what you have on your bank account. There is no set-up fees for an arranged overdraft but typically a usage fee and interest may be applied according to the type of current account you have, how long you intent to use the money and how much spending limit you have used up.
An unarranged overdraft is an overdraft where in you spend more than what you have in your current account but there was no agreed arranged overdraft limit beforehand. There is a cap amount per charging period that runs from one month to the next.
How to avoid bank overdraft charges?
To be able to avoid bank overdraft charges, here are a few tips to keep in mind:
- Understand arranged and unarranged overdraft costs before you sign up. Each bank has its own policies which means you must never overlook checking up on overdraft policies.
- There are a few things that you should be aware of when you apply for an overdraft: your monthly account fee, your interest-free threshold, arranged overdraft usage fees and interest rate for an arranged overdraft on your current account.
- Use handy banking tools such as an overdraft calculator to find out the cost of an overdraft before you apply. An overdraft calculator will help you find the cost of an overdraft for a certain number of days. It will even compute how much you would be charged if you go over your agreed limit in an unarranged overdraft.
- Always keep a close watch over your account. This way you will be able to check on bank overdraft fees and to dispute any unfair charges that were placed on your account. You can keep an eye on your account through your bank’s online banking site, through a mobile banking app or by arranging text alert overdraft fees which informs you if an overdraft fee has been charged on your account.
- Talk to a bank representative. Customer service is always ready to help you for any questions about bank overdraft charges and help if you are unsure what type of overdraft will work best for your account.
- In applying for an overdraft, get help beforehand. You can talk to a representative in person or call one using your bank hotline number. It pays to understand fees and interest rate before signing up for any type of overdraft and loan.