What is overdraft?
One of the signs of our time is the rapid development of lending to citizens. Today it is difficult to find a person who would not know what a credit card, consumer credit, mortgage, and so on. One type of loan products is overdraft. However, many people are not yet familiar with such a loan. What is overdraft?
The term "overdraft" is derived from the English word overdraft, which translated into Russian means "overspending". Overdraft as a banking service is a small short-term loan provided to organizations and individuals in the event that their own funds are spent on an account or a card.
What is an overdraft in a bank and what are its features? The main features of overdraft include:
- limited volume. As a rule, the limit of overdraft provided does not exceed 50% of the regular receipt of money on an account or a card (for example, a monthly salary);
- short repayment terms. The client must pay off the received overdraft within one to two months;
- overdraft can not be paid in parts.This loan is fully extinguished at the time of the next receipt of money on the card. The funds remaining after the overdraft cancellation are credited to the debit account;
- interest on using an overdraft is charged daily for the actual number of days of use of the loan;
- overdraft is a revolving loan. After the debt has been cleared, the overdraft limit is restored.
As an example, we will show what an overdraft in Sberbank is. Sberbank provides an opportunity for holders of certain types of payroll cards to borrow money in excess of the funds on the card ranging from 1 to 30 thousand rubles (depending on the level of salary), but not more than 50% of monthly income. It is necessary to pay the loan within 30 days from the date of the card report. The cost of the loan is 20% per annum (with the possibility of changing by the bank unilaterally). Payment for arrears is 40% per annum. Overdraft cashing occurs without commission (unlike funds on a credit card)
How to make an overdraft
For individuals, overdraft is most often an additional service for users of plastic cards (debit, payroll, credit).This service can be activated both when receiving a card, and with additional contact with the office.
Read the special article on what a bank overdraft card is.
Types of overdraft
- Allowed overdraft. This is a loan received with the consent of the bank.
- Unresolved (technical) overdraft. Formed without the consent of the bank. It turns out when charging commissions for certain operations and the absence of funds on the card for write-off. Examples: cash withdrawals for the balance in an ATM of another bank, withdrawals in a currency other than the account currency, debit card service charges at zero balance. In Sberbank for unauthorized overdraft is charged 40% per annum.
Pros and cons of overdraft
The positive features of overdraft include the possibility of easy receipt of money "before the salary".
- small limited limit;
- the need to repay the loan fully in a short time;
- forming a habit of living beyond their means.