Overdraft doubt

ram123

Hi all,

I never had an overdraft in my short earning life. I'm now offered interest free (12 months) for £250 by A&L.

I can understand it interest free and no charge for next 12 months but cant quite understand how i can use this amount.

Is it possible to transfer the agreed amount via online transfer to another account? or is it just when you pay by card / cheque you can go negative when there isnt enough fund.

Also say I have a direct debit for £30 and I have only £15 in credit. When the direct debit is made, will i go overdrawn automatically by £15 or will my direct debit be rejected saying not enough funds.

Cant get grip on all scenarios. Any useful tips much appreciated.

Thanks

jambosans

ram123 wrote: »

Is it possible to transfer the agreed amount via online transfer to another account?

Yes.

ram123 wrote: »

Also say I have a direct debit for £30 and I have only £15 in credit. When the direct debit is made, will i go overdrawn automatically by £15 or will my direct debit be rejected saying not enough funds.

Your account will go overdrawn, as you have an arranged overdraft limit of £250. Quite simply, an arranged overdraft is a line of credit attached to your bank account which can be accessed in exactly the same manner as an in-credit balance (e.g. cash, debit card, electronic transfer, etc.). Whenever you use your overdraft, any deposit will go towards clearing the overdrawn balance first (i.e. you don't make payments to a separate account like a credit card or loan).

Couple of things to keep in mind:-

• Overdrafts are short term forms of borrowing.
• Overdrafts are repayable on demand, so you should only use what you can afford to pay back instantly (e.g. a month's wage).
• Try and avoid frequent use, although £250 is a relatively small amount, it can lead to cycle of debt, or other problems (e.g. charges).
• Try saving as opposed to relying on an overdraft as emergency cash. It's always good to have an emergency line of credit, but you have to be disciplined when this is directly attached to your main current account.

I'm not trying to be patronising, just giving you a heads up, especially if you're financially inexperienced. A small amount of borrowing can seem harmless, but unless managed correctly can easily spiral out of control.

The below gives more details and explanation on overdrafts:-
http://www.moneymadeclear.org.uk/products/loans/types/bank_overdraft.html

ram123

Thanks for your guidance, that certainly helped. :beer: