There is a great variety of different credit cards in the financial market. Among this set of financial products, there is another card that is designed to quickly solve financial difficulties that sometimes arise suddenly. This card is called an overdraft card.
What is this card?
First you need to understand the definition of what an overdraft is. Overdraft is lending to a bank account, if the bank’s client does not have money in the account. That is, the bank, when a client pays for a product or service, writes off its full cost, even if there is no funds on the client’s account. Subsequently, when any funds are credited to the client’s current account, the amount that was lent to him will be automatically debited from his account.
In order to use this service, you must have a salary card or be a bank depositor. When concluding an agreement, you can include an item that will allow you to spend more money than will be on the account. Those funds that will be spent in excess of the available amount and will be overdraft.
Banks very often provide such a service. For the borrower, this service is a salvation in some situations. When the clause on overdraft is included in the agreement, it is not required to submit a huge amount of documents, collateral or guarantors. Banks, having access to the client’s current account, know all the information about the cash flow on it. Those funds that will subsequently go to the client’s salary card and will be a means of paying off the debt.
When money is credited to the account, the bank first writes off the principal debt, then additional payments for the use of borrowed funds. It must be said that the provision of an overdraft is not a free service. The bank charges interest for the use of borrowed funds, according to the terms of the agreement. If there is not enough money on the card to fully pay for the overdraft, the client must independently deposit the missing amount in any convenient way within a month.
An overdraft is much more profitable than a regular money loan or a credit card, since its conditions are much more loyal. Of course, the amounts provided by the bank under the overdraft facility are much less. They are calculated according to the average monthly salary. The annual interest rate is about 18% (set individually in all banks). Usually, the debt is repaid within a month. Issuance and maintenance of a salary card is usually free of charge or a small amount is charged. All these commissions are set individually for each client. But the most advantageous is the percentage that is set for withdrawing funds from the card. It is set at 1% of the amount. This percentage is very different from the same credit card, which charges 5% for withdrawals.
Banks for overdraft registration put forward requirements for clients:
• First, it is necessary to have permanent registration in the region where the bank is located, as well as permanently reside there.
• Secondly, to have a permanent place of work in the region where the bank is located.
• Third, have continuous work experience. The term of this experience is set individually in each bank.
• Fourth, the potential borrower should not have any debts to the bank.