What does it mean with overdraft. Overdraft - what is it
In the course of business activities, many companies are faced with a very controversial situation: raw materials have already been purchased and it is time to pay suppliers, but the products themselves have not yet been sold.
As a result, there is no revenue, and, therefore, funds for repayment accounts payable. It is for such situations of short-term business insolvency that an overdraft loan was created.
This type of lending, as an overdraft, appeared in Russian economy relatively recently, but has already gained popularity among companies experiencing temporary financial difficulties due to the nature of their business activities.
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An overdraft loan is a short-term loan that a bank provides to a company in case of insufficient funds in its current account.
For overdraft loan the following features are characteristic:
- It can only be obtained by firms that have a current account with this financial institution.
- Only responsible and reliable clients can count on it.
- The bank sets a limit on the amount of the loan and the term of its issuance.
- Overdraft is short-term - from several weeks to several months.
Overdraft lending to businesses is implemented on the basis of Article 850 of the Civil Code of the Russian Federation.
The legal basis is the annex to the agreement on opening a current account, which is signed by a legal entity with the bank.
An overdraft can arise only when, in the course of business, paying off with the next counterparty, the company discovered that there were insufficient funds in the account.
Goals
There are no strict restrictions in the legislation on what exactly the overdraft funds should be spent on. The main thing is that all costs are related to the economic activities of the company.
So, the loan provided by the bank can be spent on:
- purchase of raw materials and supplies;
- salaries of employees of the company;
- covering obligations to the budget and extra-budgetary funds;
- purchase of equipment and other goods necessary for the business.
Overdraft funds may not be used to repay loans from other banks.
Such a restriction takes place because the funds are not directed directly to production activities, which contradicts the very essence of the overdraft.
Requirements for the borrowing company
As mentioned above, only those legal entities that have a current account with this bank and have shown themselves to be reliable customers can count on an overdraft.
There are a number of strict requirements that a company must meet, namely:
- Since state registration business must be at least 1 year old, although some Russian banks set the bar at 3 years.
- Through the settlement account of the company, funds must be constantly transferred, which is evidence of vigorous economic activity.
- Each financial institution sets a minimum limit on the monthly turnover of funds on the client's account. Companies that fail to reach it receive an automatic overdraft waiver.
- The absence in the history of the current account of cases of seizure and suspension of operations.
Overdraft lending is only for those companies that have established themselves as responsible and serious partners for a long time.
The longer a company is a client of this bank, the larger overdraft it can count on. The term and amount of lending also increase in the case of a regular increase in the company's turnover, within six months.
How to get the
For legal entities, the process of obtaining an overdraft depends on whether the agreement on opening an account contains an annex regarding the overdraft or not.
If there is an application, the company must prepare the following papers and submit to the servicing bank:
- overdraft application;
- a certificate from the bank itself on what kind of turnovers were made on the company's accounts over the past six months;
- a document on the absence of outstanding debts to the bank.
All of the above papers are considered, as a rule, within 1-2 working days, after which the bank commission announces its decision to the client.
In the absence of an application, the bank must first conclude an additional agreement with the company, the basis of which will be a package of documents that includes constituent documents and financial statements firms.
In order for the bank to provide an overdraft loan, the client will have to write an application.
Only after that, the financial institution will decide whether to grant an overdraft or refuse to issue it. The limit of funds will be set depending on the amount of turnover over the past six months.
Overdraft expenses
An overdraft, like a regular loan, is provided to the client strictly for a certain period, which is 30-180 days. If the previous overdraft loan is not repaid, then it makes no sense to expect to receive the next one.
In addition to the actual repayment of the loan, there are other costs for servicing the overdraft, including:
- The interest rate on the loan, which depends on the period of operation of the company and its revenue.
- Overdraft costs.
For their regular and reliable customers, many banks provide Grace period lending, and also reduce the interest rate as much as possible, which makes this type of lending more profitable than traditional loans.
Among the costs, it makes sense to mention mortgaged property. The fact is that a company wishing to attract a large overdraft usually presents the bank with movable or immovable objects in the form of a pledge. In this case, another additional agreement regarding collateral relations is drawn up.
Difference from credit
Despite the fact that overdraft is one of the types bank loan, it still has specific features that distinguish it from typical short-term loans, in particular:
- According to it, it is not a loan agreement that is drawn up, but only an annex or an additional agreement to the contract on opening an account. It specifies the term of the loan, the limit of funds and the interest rate.
- The overdraft becomes effective only when the funds on bank account companies will be exhausted.
- The loan provided does not designated purpose: it is only important that the funds are spent on economic activity firms.
- The procedure for obtaining an overdraft is more convenient and simple and does not require filling out a huge number of papers, and the period for reviewing documents is also minimized.
If, having opened a bank account, the company strictly fulfills its obligations, then after six months it can already count on receiving an overdraft loan without any special difficulties and tedious procedures.
Overdraft cards
If the basis of a profitable short-term loan for legal entities is a bank account, then for individuals it is an overdraft card, the use of which is more profitable than a small consumer credit.
You can get it by contacting any of the bank branches that work with this product, and concluding an additional agreement based on an existing credit or debit card.
An overdraft card allows the client to spend more funds than is available on it, in particular:
- Credit card with an overdraft implies that in some cases the client can directly draw on it an additional short-term loan in excess of the funds already provided by the bank.
- Debit card with an overdraft implies that a bank customer can use a short-term loan if own funds on his account is not enough to purchase goods or services.
Currently, most banks provide customers with a grace period for overdraft card. If the client has time to repay the loan during this time, then he will free himself from paying interest on the overdraft.
Irina Sherbul
bsadsensedynamick
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business vocabulary
Definition, features, pros and cons of the service
The first overdraft was issued in 1728, when a client was allowed to take £1,000 more than was in his account. The loan was issued by the Royal Bank of Scotland in Edinburgh.
Article navigation
- What is an overdraft in simple terms
- How does an overdraft with a grace period work?
- What means credit limit
- Advantages and disadvantages of a banking product
- Why is overdraft dangerous?
- Terms of provision for bank customers
- Overdraft types
- Permitted – the standard model for all types of overdraft
- Technical overdraft - what is it
- Salary overdraft
- Micro overdraft
- Overdraft secured
- Umbrella
- Unsecured overdraft for a large amount
- Credit and overdraft - what's the difference
An overdraft is a microloan for a short period of time. An overdraft loan has a number of features that make it beneficial for individuals and legal entities.
What is an overdraft in simple words
A card overdraft is a loan that you can get at any ATM using your debit card. To do this, you need to draw up an agreement with the bank to connect the quick loan service once.
The concept of overdraft in translation from English means "overspending". This service makes it possible, in addition to fixed assets, to use additional ones, as a loan. Accruals are made to the salary card individual or to the account of an individual entrepreneur.
When withdrawing additional funds from the card, the first money received on the account will be transferred to the bank as a payment of the debt.
A bank overdraft provides an opportunity to quickly receive the necessary right moment facilities. But you can use it only if you are sure that you can quickly repay the debt. Violation of the established terms of repayment of overdraft debt can lead to high interest rates.
How does an overdraft with a grace period work?
The scheme of the overdraft is to provide a loan for a certain period, often 30 days, but upon additional agreement with the bank, it can be extended up to 60 days. At the same time, for each day of debt, a certain percentage is charged, corresponding to annual rate jar.
The grace period allows you to avoid the accrual of interest if the debt was repaid within fixed time. More precisely, by taking a loan from a bank in the amount of 1000 rubles, you will return 1000 rubles, without overpayments. The main condition for such an option is the payment of the debt within the time period established by the contract.
You need to know what an overdraft limit is and fully comply with it. Violation of the established restrictions will entail penalties from the bank.
What does credit limit mean?
When connecting an overdraft, a limit on the loan amount is set. It is tied to the size of the turnover of funds on the account. The limit of the installed option will depend on wages physical person. For example, 10,000 rubles are credited to the account every month. The loan limit can be equal to this amount, but no more.
When checking the account, the ATM may display the available balance, taking into account the overdraft. Be careful not to confuse fixed assets with credit.
Conditions depend on the bank and your credit history. In certain credit institutions, they can provide a loan of up to 50% of the turnover amount.
Please read the contract carefully before signing up for the service.
Advantages and disadvantages of a banking product
An overdraft is a special form of crediting an account, a convenient option for a bank card that will allow the owner to receive a number of advantages if a loan is needed.
The main advantages of the service:
- Low percentage. The rate is on average 2-6% lower than that of conventional loans.
- Automatic return of debt to the bank. If the balance of the client's account is positive, the funds will be automatically debited and transferred to pay the debt.
- Independent regulation of the amount of debt. Whether or not to use the loan is up to the client. If you need a loan, the borrower himself determines the amount (within the established limit) that he wants to receive at that moment.
- Fast connection. An important point to be analyzed bank employee to connect the option - the movement of funds on your current account. The banker can receive such information within a few minutes, so it will not take much time to process a loan for your card.
The advantages listed above make overdraft one of the better ways microloan. But at the same time, it is necessary to take into account the disadvantages and risks of the service.
Among the disadvantages are:
- Limited loan options.
- Monthly repayment. It is necessary to close the debt 100% within the agreed period.
- You need to keep the money flowing. The movement of funds on your account must correspond to the amount agreed in the agreement with the bank.
In case of violation of the second and third points, the bank may impose penalties on the borrower. If after 25-30 days the debt has not been paid, interest is charged, increasing the debt.
Why is overdraft dangerous?
Regularly using an overdraft, over time, customers begin to forget to return funds to their account in a timely manner. Such an oversight will lead to a number of consequences.
Late payment of the debt is a violation of the terms of the contract, which may lead to:
- Fine. The bank has the right to impose sanctions on the borrower in case of a delay in repayment Money.
- An increase in the interest rate. By the next loan tranche, the rate may increase by several percent.
- Denial of credit. With a regular delay in repayment of the loan, the bank may completely refuse to lend and terminate the contract.
- Bad credit history. Do not think that if one bank fails, you will be able to conclude an agreement in another. By not fulfilling the conditions of the bank, you will spoil yours. Information about your inability to pay debts on time will be known to each bank.
The danger of an overdraft seems imaginary. Most borrowers believe that they will always be able to repay the loan on time, but in the end, sooner or later, many fall into the credit trap. In order not to stumble over pitfalls, follow simple rules:
- Remember the due date.
- One day a month, the debt on the loan should be absent.
- It is necessary to maintain the cash flow agreed with the bank on the card.
- Control the expiration date loan agreement.
Knowing these points will help to avoid violations and the occurrence of associated risks. But, in order to know the terms, interest and other terms of the contract, when making it, pay attention to some of its points:
- Overdraft percentage.
- Loan issuance fee.
- Overdraft fee.
- Commission for consideration of an application for connecting an option.
- Application fee and loan collateral.
- Insurance.
The contract may not include all of the costs listed above. But you need to carefully study these points when applying.
Terms of provision for bank customers
This loan is provided to individuals and legal entities. Phys. a person receives a loan for personal needs and can use it in any situation requiring additional funds.
Legal entities may need an overdraft in three cases:
- during the month there are cash gaps;
- the business needs a short-term loan;
- the company needs to have a "financial cushion".
The use of an overdraft gives the company ample opportunities for profit growth. If you correctly and timely introduce additional capital, you can significantly increase the turnover.
Such a scheme only works if an overdraft with a grace period is connected.
Each bank sets its own conditions for using the service. But there is general rules conclusion of the contract:
- Loan terms are 1-12 months.
- It is necessary to repay the debt once a month, unless other conditions are specified in the contract.
- A current account must be opened in the bank providing the service.
- Credit and debit card turnover must be stable.
If all the conditions and nuances have been studied, then you can start connecting. To receive an overdraft, you must perform the following steps:
- Contact the bank employee who will provide the loan.
- Find out under what conditions an overdraft will be connected.
- Provide the credit department with all necessary documents.
- Waiting for activation decision.
Bank overdrafts are issued subject to the client's compliance with all necessary requirements.
Overdraft types
There are several types of overdraft, each of which differs in interest rates, payout limit, terms of provision and repayment methods. There are several main categories of this loan:
- accessible;
- technical;
- salary;
- micro;
- mortgage;
- umbrella;
- unsecured.
To choose the best option for yourself, you need to understand the difference between them. To do this, each type should be disassembled in detail.
Permitted – the standard model for all types of overdraft
An approved overdraft is a type of collateral that complies with the terms of the agreement. Such a loan is considered a classic and is issued according to all standard requirements. The limit is set in accordance with the average cash turnover on the account, and the average rate is 14.5% per annum.
Technical overdraft - what is it
Unauthorized overdraft (also called technical, unauthorized, or prohibited). The name itself suggests that the withdrawal of an amount exceeding the amount of the balance on the card occurs without the approval of the bank.
The issuance of a technical overdraft can occur for various reasons, for example, the amount for the overdraft in the amount of 1000 rubles remained on the card, you paid for the purchase in dollars Bank operation, the exchange rate rose, and the cost of your purchase amounted to 1050 rubles.
It is going beyond the limit that is called an unauthorized overdraft. In this case, the client will see a red balance on his card (the amount of overspending that exceeds the limit will be highlighted in red).
Technical overdraft can be provided and unforeseen:
- Provided. Negotiated with the bank and included in the contract. When it occurs, it is necessary to quickly repay the debt with the indicated interest.
- Unintended. The occurrence of such a case is not specified in advance; in such a situation, the borrower will be fined. This possibility is provided for by the provisions of Article 395 of the Civil Code of the Russian Federation.
Regardless of the type of technical overdraft, the debt must be repaid as soon as possible, along with fixed interest, which is often up to 50% per annum.
Salary overdraft
One of the classic looks. It allows you to overspend salary card. This service is in demand, as it does not require additional registration and is often installed on the card immediately after its issuance.
The limit of such a loan is on average 50% of the amount of wages, and the period of validity of the loan agreement is not more than 12 months.
If the client needs a loan, he can withdraw funds at any ATM or pay with a card in a store. The next time the salary is credited to the account, the amount of the debt will be automatically written off and transferred to the bank.
Micro overdraft
A feature of this loan is the minimum limit of 300 thousand rubles. Such an amount is insignificant for legal entities, therefore banks consider this type of loan a micro overdraft.
Not taking into account the minimum limit, the other conditions for obtaining and repaying a loan do not differ from a classic microloan.
Overdraft secured
Every bank wants to be sure of the return of their funds. Therefore, when providing an overdraft option, a credit institution may require collateral as a guarantee of debt repayment.
The bank accepts the following types of collateral as collateral:
- the property;
- turnover products;
- cars;
- land;
- equipment.
All other terms and conditions of the agreement correspond to the standard overdraft.
Umbrella
Designed for a network of companies. It is assumed that this will cover the cash gaps of the entire holding, which should include at least 3 companies.
The contract is drawn up for a period of up to 12 months. The service includes the following benefits:
- no commissions;
- flexibility in choosing a repayment scheme;
- the possibility of changing borrowers during the term of the contract.
The overdraft will provide the company with a "financial cushion" in critical situations.
Unsecured overdraft for a large amount
For time-tested clients, an overdraft is provided without additional collateral of property. In such a situation, the guarantee of payment is stable financial turnover on the card.
It should be borne in mind that this only works for borrowers who cooperate with credit institution not the first year.
Credit and overdraft - what's the difference
Both services give the client the opportunity to receive a cash loan for a certain period, but the conditions for obtaining a loan and its repayment are significantly different. The main differences between a loan and an overdraft are:
- Interest rate. An overdraft is issued at an average rate of 4% lower than a regular loan.
- Debt repayment period. A classic loan agreement is provided for a period of several months to several years, while overdraft debt must be repaid within 30 days from the date of receipt of the loan.
- The speed of obtaining a loan. Loan processing takes from several hours to several days. You can withdraw or pay with funds using an overdraft at any time in stores or terminals.
- Sum. A loan can be obtained in an amount several times higher than the monthly income. Overdraft has a limit that cannot exceed the average turnover of funds on your bank card.
- Debt repayment. With an overdraft, incoming funds are automatically debited from the account to pay off the debt; there is a special schedule for repaying the loan, distributing the return of the loan amount over several months.
An overdraft differs from a line of credit in a number of ways. But it is impossible to say unequivocally which type of loan is better. Each of them has its own advantages and disadvantages. You will have to choose the type of lending yourself, depending on your individual needs.
In this article, in our own words and plain language Describe what an overdraft is. Learn how to use the service, learn the basic rules and nuances, and the service will help you out more than once in critical situations.
Hello, friends!
We continue to improve our financial literacy and at the same time tighten your English language. Today, the foreign term “overdraft” is next in line. We will learn its meaning, learn to understand and not be afraid.
The number of bank card users is growing every year. Among them are students, pensioners, and even children. Why? It is convenient, practical and safe compared to a bundle of money or a mountain of coins in your wallet. We are increasingly using bank cards to receive earned money, transfer money, withdraw cash and pay for goods and services in stores and on the Internet.
Banks are trying to support our desire to use credit cards as well. After all, solvent customers are the main source of profit and the raison d'être of the company itself. financial and credit organization. Banks compete with each other, lure us with new banking products and make offers that are hard to refuse.
We have already dealt with the concept, types and conditions for using debit and credit cards. We learned what, for example, cashback and overdraft. It is on the latter that I want to dwell today in more detail. Not everyone likes to use a loan, but not everyone suspects that they can become a bank debtor without having borrowed money. How is this possible? Let's figure it out.
What does the term "overdraft" mean?
The foreign word “overdraft” (overdraft) in translation from English means “overspending”, “excess of the loan”. We see the familiar word credit, so we think that it refers only to those who like to live in debt. This is not entirely true. An ardent opponent of other people's money can also face an overdraft. Reading the reviews of bank card holders, I was convinced of this. But first things first.
Overdraft is short term loan, which is provided by the bank under a bank account agreement to cardholders (usually salary cards). For example, when you do not have enough own funds to purchase a product, the bank will gladly provide the missing amount. But under certain conditions, of course.
Civil Code Russian Federation(Article 850) indicates that if the bank makes payments from the client's account in the absence of money on it, then he thereby gives him a loan with all the ensuing consequences. The loan is issued for a certain period and not free of charge. This also applies to overdrafts.
This raises fair questions: “Do I need an overdraft?”, “How to connect?” and “How is it extinguished?” The answers to them depend on its type and the bank providing this service.
Kinds
Distinguish:
- permitted,
- unauthorized (technical) overdraft.
Let's dwell on them in more detail.
Permitted overdraft
Permitted overdraft is activated upon the personal application of the cardholder. It is provided within the limit set by the bank and at a certain percentage. These conditions differ not only for different banks, but also for different clients of the same financial institution.
Overdraft limit- this is the amount that a bank client can have if there is a shortage of own money in the account. It is calculated for a specific person, based on the amount of funds that pass through his card, his credit history and some other factors.
Bank interest rates also vary. For example, Sberbank set the following:
- 20% within the cash limit,
- 40% late repayment fee,
- 40% - fee for exceeding the limit, but only for the amount of this excess.
Attention! Sberbank connects the overdraft service not to all cards, but only to debit (salary) ones. But, for example, if you are the owner of "MIR Classic", "MIR Gold", "MIR Premium", then the overdraft limit is not provided. A complete list can be found on the bank's website.
In my article about, I dwelled in more detail on the issues of tariffs, conditions for obtaining and using them. If you haven't read it yet, catch up.
AT Tinkoff Bank the following conditions apply:
- The service is connected at the initiative of the bank and with the consent of the cardholder.
- If you borrowed no more than 3,000 rubles from the bank, then there will be no overdraft fee (subject to timely repayment within 25 days).
- If the loan amount was from 3,000 to 10,000 rubles, then the bank will take 19 rubles. in a day.
- From 10,000 to 25,000 - 39 rubles. in a day.
- Over 25,000 - 59 rubles. in a day.
- Penalty for late repayment - 990 rubles.
These conditions are valid for debit cards, for credit cards only a technical overdraft is possible.
Read about the terms of use and pitfalls in my article. It can be very helpful. Especially if you are on the way to choosing the optimal means of payment.
Unauthorized overdraft
An unauthorized or technical overdraft may occur even if you have never borrowed. And this often becomes an unpleasant surprise, which turns into not only the appearance of debt, but also the accrual of interest and penalties for non-payment. To avoid this, you need to know the common causes of debt:
- Exchange difference. This case may arise when you pay with a ruble card abroad. Due to the features banking system funds are debited from the account after a few days. If during this period the exchange rate has changed dramatically, then you can go negative if there is not enough funds on the card.
- Payment of mandatory payments. For example, banking fees.
I will comment on this case using my own example: once a year, in May, a service fee of 450 rubles is automatically deducted from my card. I usually withdraw from the card all the money received on it. Result: in May, I went negative by 450 rubles, i.e., a technical overdraft came. - Bank technical error. For example, a double credited amount or vice versa withdrawal of the same amount 2 times. The bank notices the error and corrects it. But the client may not have money in the account, so again a minus.
Avoiding a technical overdraft is easy. Who is warned is armed. If we are aware of the potential to go into negative territory, then it is enough to keep a minimum amount of money on the card or constantly monitor the status of the account in order to pay off the debt on time. Banks often provide a grace period (usually a month) during which we can repay the entire amount of the debt without interest.
Connection conditions
Let me remind you that the overdraft is connected with the consent of the client. Sometimes this service is automatically entered into the bank account agreement. Therefore, I do not get tired of repeating that we carefully read all the documents and ask about all the ambiguities. There is a signature in the contract - it means that we agreed with all the requirements of the bank.
The conditions for connecting the overdraft service in banks are different, but here is an approximate list of documents that you may need:
- Connection request.
- Questionnaire of the borrower on the letterhead of the bank.
- Passport.
- Another identity document (for example, SNILS, TIN, driver's license).
- Income statement (not all banks require).
As you can see, the set of documents is minimal.
Since the bank agrees to share its money with us, it is quite understandable that it imposes certain requirements on potential borrowers. Among them may be:
- Availability permanent residence and living in an area served by a bank.
- The presence of a permanent place of work and work experience.
- Having an account that regularly transfers money.
- Net credit history.
That is why overdraft is actively connected to salary cards. Often banks themselves call the client and offer this service. Here it would be appropriate to explain how a debit card differs from an overdraft card.
Remember! When you pay with a debit card, you only manage your own money. And not a penny more. If you have connected the overdraft service, you can borrow the missing amount from the bank. But this is no longer yours, but other people's money that needs to be returned.
An overdraft is a short-term loan. Its terms vary from 6 months to 1 year. During this time, you can lose or change your job, move, etc. Therefore, banks require you to periodically renew the contract. So they reduce the risk of non-return of the money provided to you.
How does an overdraft work: differences from a loan
This service works in the same way as any loan. I borrowed it, which means that after some time it is necessary to return it and pay interest on the use of other people's money.
Although an overdraft is a type of consumer loan, there are still differences between them.
Comparison options | Credit | Overdraft |
Loan terms | Different, depending on the creditworthiness of the borrower and the type of loan. | Only a short-term loan (in most cases up to 1 year). |
Amount of credit | Calculated after a thorough analysis of the borrower's solvency. Not only his monthly income is taken into account, but also the income of family members, property owned, etc. | It is calculated based on the monthly receipts of money on the card. |
Frequency of making payments | Periodically (usually once a month) during the entire loan term. | With the next receipt of money on the card, the full amount of the debt is immediately debited. |
Issuance conditions | A set of documents confirming your ability to pay. Often, collateral and guarantors are required. | The minimum set of standard documents. Without collateral and guarantors. Quick decision to connect the service. |
Terms of use | The entire requested amount is issued immediately, which is repaid in installments depending on the terms of the contract. To resume credit line you need to contact the bank again. | The loan is revolving as it is spent and repaid. |
Interest rate | Individual for different types credit, terms and conditions of repayment, solvency of the borrower. | The same for all overdraft card holders. Usually higher than a loan. |
Receipt speed | It takes time, because the bank makes a decision only after analyzing the creditworthiness of the borrower. | With a positive decision to connect the overdraft service, money can be used at any time of the day or night. |
Advantages of an overdraft, or what it gives to a competent user
Traditionally, I will consider all the advantages and disadvantages of an overdraft card.
Advantages:
- This is non-purpose loan so you can spend it on whatever you want.
- The amount is constantly renewed. No need to go to the bank and apply new loan. The main thing is to repay on time.
- No collateral or guarantors.
- Interest is charged only on the amount you have borrowed, and not on the entire available limit. If you do not use an overdraft at all, then no interest is charged.
- You can use the money at any time, regardless of the bank's working hours.
- You can cancel the service at any time.
And, of course, the disadvantages:
- With all the availability of money, one should not forget that this is a loan. Repayment is mandatory and irrevocable.
- The interest is calculated daily, and the amount is repaid in one payment, automatically when the money is credited to the account.
- We often (usually once a year) renegotiate the contract.
- Credit limit (as a rule, does not exceed the monthly receipts on the account).
- High interest rates on loans. The bank thus compensates for its risks.
- The ability to go into a technical overdraft without knowing it.
- There is a great temptation to get carried away with easily accessible money and lose control over spending.
How to disable overdraft
To refuse this service, it is enough to write a statement about it. The contract will be terminated if there is no debt to the bank.
Please note that if you change jobs, it is not enough to simply throw away your former employer's payroll card. Contact the bank or check for yourself if there is a debt. Otherwise, you may receive an unpleasant surprise in the form of accrued interest and penalties for untimely repaid debt.
Some banks practice the impossibility of turning off the overdraft. It must be in the contract. In this case, when concluding it, you can specify a zero limit on receiving money.
Conclusion
Everyone chooses for himself what money he will live on, his own or borrowed. There is no need to be afraid of an overdraft, but you need to understand how to use it so as not to drive yourself into debt hole. Always keep your finger on the pulse of your finances. Then you can afford a little more than you have at the moment. Agree, this is sometimes vital.
I would be glad if you supplement the article with your thoughts on this matter in the comments. Or maybe you have interesting cases from your life? They will give readers the necessary experience and provide invaluable assistance.
Information about what an overdraft is can be useful in case of an urgent need to receive funds. At some points, on the contrary, this function creates some interference. If there is no need for additional foreign exchange resources, the salary card holder needs to constantly maintain a certain limit on it. When agreeing to such a program, you need to study the contract in detail so as not to overpay extra interest.
What is an overdraft in a bank?
The bank's overdraft service, often offered to individuals and legal entities, is a lending program with special individual conditions. Its features are as follows:
- transfer of funds to the client's current account;
- the write-off of the amount of debt occurs regardless of the balance of funds;
- the overdraft interest rate is regulated by the bank - it may be absent, charged only in case of late payment or vary depending on the balance;
- overdraft usually provides small amounts for a minimum period - for a period of temporary financial difficulties.
What is an overdraft card?
Overdraft cards are widely used. In most cases, they are assigned to the client's current account, to which he receives a salary or to a deposit account. How an overdraft works - the bank transfers to the client's account the amount specified in the contract, which will be at his disposal for a certain period.
At the end of this period, the client is obliged to pay the spent funds and interest, depending on the terms of the contract. If the client does not require additional funds, he may not spend them, maintaining the overdraft limit, or refuse such a service. At the same time, you need to remember how much you need to leave on the card - this is one of the disadvantages of such a banking product.
What is a Permitted Overdraft?
As a rule, the available overdraft is calculated depending on the income received on the client's current account. Sometimes such a service may be automatically included in salary project client. Employment certificate can serve as proof of income. To apply for an overdraft, additional information may be required:
- permanent registration;
- proof of work experience;
- no debt on other loans.
Overdraft limit - what is it?
In all cases, the provision of an overdraft is accompanied by a limitation on the limit of the funds used. Limit - the amount that can be used by the client for personal purposes and must be returned within a certain period. In most cases, it is calculated as a certain percentage of the amount of money on current account and their turnover. An additional condition for using the available overdraft may be a decrease in the limit when withdrawing money and increasing it when replenishing an account.
How is an overdraft different from a loan?
Regardless of one function - the issuance of funds for the use of customers and their subsequent return with and without interest, the difference between an overdraft and a loan still exists. The following distinguishing features can be distinguished:
- As a rule, a loan provides funds at a fixed interest rate specified in the agreement, and an overdraft - without it in case of timely repayment of money. If the overdraft payment is overdue, then the interest on it can be much more than the overpayment on the credit line.
- An overdraft, as a rule, does not require confirmation of income, but also provides a much smaller amount for use than a loan.
- The amount of the loan depends on the solvency of the client, and the amount of the overdraft depends on the wages coming to a specific account or the amount money turnover On him.
Why is overdraft dangerous for individuals?
Having access to a certain amount of money, a person can forget about repaying a debt to a bank. This is called a technical overdraft - debt when paying cash. In most cases, it appears when the available limit under the overdraft agreement is overdrawn. In this situation, in addition to the main overpayment under the contract, interest may be charged for late payment, which is several times greater than the amount spent.
There are cases when a client accidentally withdraws from the account a larger than usual amount, which includes funds provided by the bank. As a result of such actions, it is possible to get into a mess and pay an extra amount. Sometimes when released new card an overdraft service is automatically connected to it, and if the client does not know about it, he can overpay a considerable amount of interest. Therefore, it is important to check all services assigned to bank card. Taking an overdraft and forgetting about the requirement to maintain a limit on the account is a big danger for the client.
How to connect an overdraft?
Having understood the essence of an overdraft, the client decides whether he needs such a program or not. In case of a positive answer, you should contact the bank branch to conclude an agreement. The procedure for connecting an overdraft may vary for each bank. In some cases, it connects automatically. The available limit is calculated in a similar way - depending on the monthly income and the turnover of funds in the account.
In most cases, only an identity document is enough, but the client may need some papers:
- job references;
- confirmation of income;
- account statements.
How to disable overdraft?
If there is no need, the overdraft service can be disabled. To do this, you should contact the bank to terminate the contract. One of the conditions for such an action will be the absence of debt under this program. Different financial institutions have different conditions for providing such a financial product. They must be spelled out in the contract. If there is a condition that it is impossible to disable the overdraft, then when signing the agreement, you can specify a zero limit for the provision of funds.
It does not matter what the client chooses - a loan or an overdraft program, it must be taken into account that both banking products are associated with a financial burden. Interest on the use of bank funds and the terms of their accrual may vary, therefore, no matter how tempting the offer may be, it is important to remember what an overdraft is and with what financial risks it may be related.
The amount, terms of granting, the procedure for repayment of the overdraft are regulated by the contract for banking service. Its limit is set by the bank based on the analysis cash receipts and transactions carried out on the card and may be changed over time. In any case, overdraft:
- is short term;
- entails the accrual of interest for the use of the loan;
- must be returned in full before the end of the billing period;
- requires securing obligations;
- provided in the absence of claims to the client;
- usually does not include preferential order loans, but there may be exceptions.
Overdraft types
Overdraft happens:
in relation to the ownership of funds
- permitted (provided by the bank);
- unauthorized or technical (exceeding the established limit, entails penalties);
depending on maturity
- continuous (the debt is repaid in installments within the agreed period, up to the end of the contract);
- with zeroing (the use of this type of overdraft requires the systematic payment of the full amount of the debt to established by the bank period, most often - within a month);
by the nature of the provision
- blank, i.e. without security or with one surety;
- secured by the borrower's property.
After opening a current account, legal entities can be provided with advance overdraft. As confirmation of the solvency of the organization, it is necessary to present a certificate with performance indicators. Promsvyazbank offers the "Credit-Overdraft" service and makes it possible to receive 300 thousand-22.5 million rubles for business development. However, the financial institution has set strict limits on the possible limit: the amount cannot exceed 50% of the average monthly turnover on the borrower's current account over the past six months. But Baltinvestbank offers existing customers no more than 40%.
Offers for individuals
Overdraft can be used not only by organizations, but also by individuals. Naturally, the submitted documents, as well as the nature of account transactions, affect the limit in this case. For example, IntrustBank cardholders can spend 1,000 rubles in excess of the balance, and the service fee will be 28%. However, if the limit is exceeded, a rate of 36% applies.
Unlike IntrustBank, SMP Bank provides an overdraft for more than favorable conditions. First of all, maximum amount is 1 million rubles. (MasterCard Platinum), owners of gold and standard cards can count on a limit of up to 600 and 300 thousand rubles. respectively. Secondly, there is an interest-free period (55 calendar days). Thirdly, the fee for using the service is 19.99-27.99%. However, in the event of an overdue debt, the penalty will be an order of magnitude higher and amount to 55% of the amount submitted for repayment.
In Sberbank, gold card holders are given the opportunity to receive an overdraft in the amount of up to 45 thousand rubles. under 20% per annum. At the same time, the client must repay the overdraft debt in the amount indicated in the report no later than 30 days from the date of this report. In case of late repayment and relimit, the rate will increase to 40% per annum.
Which is better: a credit limit or an overdraft?
Of course, there are common features between a loan and an overdraft, but these are two completely different services, because:
- in the first case is made credit card, in the second - debit;
- the actual size of the credit line exceeds the amount of the overdraft;
- a credit card is opened at the discretion of the client, the decision to allocate an overdraft is made by the bank;
- loan can be repaid minimum payments during the entire validity period of the card, the overdraft is returned in a shorter period and in full;
- the credit limit, as a rule, is not reduced by the bank, and the overdraft may be completely excluded.
Thus, when choosing one or another product, it is worth relying on needs. If you plan to use the loan permanently, it is better
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