An overdraft facility can be a great way to avoid bounced cheques and late fees.
But overdrafts are not for everyone. For example, if you’re in the habit of bouncing your cheques, or if you have trouble keeping track of your spending habits, then an overdraft facility may not be right for you.
What is an overdraft?
An overdraft is a line of credit that allows you to withdraw more money than what’s in your account when making purchases or paying bills online. It’s available at most financial institutions, and it costs less than other types of loans like payday loans or lines of credit from banks or credit unions. You’ll also get access to this service without having to provide any collateral!
Overdrafts can be a great way to avoid bounced cheques and late fees.
Bounced Cheque: When using an overdraft, you’re able to withdraw more money than what’s in your account. If that happens, and the bank returns the payment because there is not enough money in your account, this will result in a fee. However, since you’ve already spent the money to make a purchase, an overdraft might be able to help you avoid this fee.
Late fee: You can receive a late fee if your payment is due on or before a certain day but isn’t received by then. If there’s not enough money in your account to cover it, and you don’t have an overdraft, you might not be able to pay your bill on time. With an overdraft, if there isn’t enough money in your account when a payment is due, it can help by letting you make the purchase anyway and pay for it later.
What are the top benefits of using an overdraft facility?
In addition to avoiding bounced checks, there are several benefits to using an overdraft facility. Let us look at some of them below.
1. You can withdraw more money than what’s in your account
One of the top benefits of using an overdraft facility is that it allows you to withdraw more money than your account when making purchases or paying bills online. For example, imagine you have £100 in your account and want to buy a £20 item. With most banks, you would need enough money in your account to cover the purchase plus any additional fees. If you don’t have enough available funds, your purchase will be declined, and that is that!
With an overdraft facility, since there isn’t enough money in your account to pay for the purchase, you can make it anyway and repay the amount later on.
2. It’s available at most financial institutions
Another benefit of using an overdraft is that it’s available at most financial institutions! Since it allows you to withdraw more money than what’s in your account, this requires some planning on your part. You have to make sure you have the necessary funds available in your account when a payment is due, so there isn’t a chance of it being declined. Failure to do this will result in charges!
3. It’s available without having to provide any collateral
One more benefit of using an overdraft facility is that you don’t need to provide any collateral. This means the bank doesn’t require you to use your house or car as security when providing you with an overdraft facility.
On the other hand, applying for a loan would be required because this type of credit is considered unsecured credit.
4. It costs less than other types of loans
With an overdraft facility, it’s much cheaper than other types of loans. One of the reasons is that you already have a loan, and now you’re taking out another one. However, when you have multiple loans, it will quickly become costly as most creditors charge interest on both of them.
5. It doesn’t require much paperwork or credit checks
Since overdrafts don’t involve providing any collateral and it’s cheaper than other types of loans, there isn’t much paperwork needed to apply for one. In addition to this, there are no credit checks required. However, if you have a bad track record with your current financial institution, it is unlikely that they will approve your application. An overdraft facility is easy to apply for and only takes a few minutes to be approved!
In conclusion
There are several benefits to using an overdraft facility. They include the ability to withdraw more money than what’s in your account, available at most financial institutions, without having to provide any collateral, and it costs less than other types of loans. Additionally, you don’t need much paperwork or credit checks!
Get in touch with the team at FundingBay to find out more!
