Bank Overdrafts

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Don't exceed your limit

Bank overdraft costs can be a pain

When it comes to your finances, you may find that when things start going badly, they can snowball and will get worse and worse. An easy example of this comes with bank overdrafts and charges that are associated with them. For many people, an overdraft starts off as a safety measure, acting as an opportunity to have additional cash if they need it. Over time, people may start to see their overdraft as the starting point of their finances which means that when they reach the bottom of their overdraft and then go over it, they are in trouble.

There are some banks that will charge their customers a fee for having an overdraft, which is something to consider. If you don’t really need your overdraft but are using it when you don’t have to, this will be incurring a cost that you don’t really need. You may think that the bank overdraft charge for a single month is just a small amount but that small amount every single month will add up. Also, if you are with a bank for a number of years or all of your adult life, how much money will you eventually pay for this overdraft? Even having an overdraft and sticking within the proscribed limit can be a costly activity for many people.

However, the charges and fees for overdrafts really come into play when you go over your expected overdraft limit. This is when the bank will charge you a fee for breaking your overdraft and they may also charge you a fee for every transaction that takes place when you are in overdraft. If you fail to notice that you have exceeded your overdraft, you may find that you run up a large charge.

 

Don’t get into a debt cycle

This means that you have to pay a lot of money to get yourself back to a level where you were at and of course, you will be at risk of breaching your overdraft again. This means that you may see yourself dipping beyond your expected overdraft limit, which could see you facing more fines and penalty charges. Before you know it, you are entering a cyclical pattern where you break past your overdraft, pay fines and penalties to get your account back to a normal level but then because you have used all of your income to pay off these additional charges and fees, you find yourself going beyond the expected level of your overdraft once again.

This can be a pattern that people find themselves trapped in and it can be extremely difficult to get out of. When you end up throwing money away in an attempt just to keep on an even keel, the chances of breaking the cycle become harder and harder every month.

There is no doubt that for many people, an overdraft is a positive thing and when it is respected and taken care of, you’ll find that an overdraft is a great thing. For many people though, an overdraft can represent difficulties and will represent a danger in trying to improve your finances.

In some situations where people need money in a hurry, a bank overdraft can be a great option. For a nominal fee the overdraft can be set up, you can resolve your financial matter quickly and then when you pay off the overdraft and return to normal, you can resume your normal life. However, if you find yourself going beyond your overdraft and struggling to move away from the cycle of debt and penalties that this can bring, an overdraft may not be the best solution for your financial needs.

Having financial options is a positive thing but people need to weigh up what is right for them. At certain times or for certain people, an overdraft is fine. For other people, bank overdraft costs means that this is not a viable option and it would be best to look for alternative solutions.

 

By Kieran Moulden