Debt Consolidation is not the Only Alternative!
Bank Overdrafts,
Especially Student Overdrafts Could be Expensive - Maintain Diligent
Accounts
Ask a parent, student overdrafts are the last item, they think their child’s
finance books should include. Consult a bank, there is nothing more wonderful
than student overdrafts for those aspiring to make it big in life. The apparent
contradiction in the two statements can be quite clearly understood, if analyzed
based upon the implications of taking up supposed free bank overdrafts while
pursuing education.
What are bank overdrafts??
Bank overdrafts are borrowing tools, with limits on the total overdrawn balance
on bank’s current account. With quite flexible features to offer, bank
overdrafts are among the most popular, temporary loan forms in UK. There are
various types of bank overdrafts, which can be applied for, depending upon the
borrower’s suitability and eligibility for overdraft. For instance student
overdrafts are special bank overdrafts facilities extended by banks to students,
in an attempt to entice them and thus retain over a longer time frame.
Bank overdrafts in UK typically function within the restrictions of pre arranged
limits. These stated pre defined limits again vary with the type of account,
account holder’s credibility and status. Continuing with the same example, under
student overdrafts head, students usually enjoy a free overdraft facility of up
to £2,000. Overdraft balances beyond this limit entail cost factor in terms of
interest rates or maybe non payment penalties.
The pros and cons of bank overdrafts
Bank overdrafts are a desired facility, till the time they are well managed and
aptly accounted for. By providing for interest free, temporary overdrawn
balances, bank overdrafts solve various immediate business and individual needs.
However, from the time bank overdrafts facilities are even slightly ignored or
are left unpaid, the complementary expensive financial implications start
mounting. The seemingly profitable proposition referred to as bank overdrafts,
suddenly transforms to an undesired debt complication.
Likewise in case of student overdrafts, while one hand, overdrafts enable self
sustenance during the study period, any negative balances post education
completion imply impossible cost escalations. Such student overdrafts often
compel fresh graduates to maintain accounts with the banks, even when there are
better options at ease. In an implied tone, lucrative student overdrafts
facilities, as extended during the learning phase, hinder the right decision
making process of searching for an appropriate bank account.
Authentic studies and reports as issued by recognized UK associations, have in
many ways, validated the stated repercussions of student overdrafts. Penalties
for borrowing over the overdraft limits, non-ability to immediately pay post
education completion and implied charges are among the few highlight features of
student overdrafts.
Steer clear of the shortcomings
Bank overdrafts are among the most supportive tools, if can be deployed wisely.
Student overdrafts for instance can help generate the desired funds at no extra
cost. However, any mismanagement towards this end could immediately imply
losses. Thus to better manage the available resources, it is suggested to
benefit from the enhanced bank overdrafts features, but at the same time
ensuring restrictive operability within the extended overdraft limits.
Articles on Overdrafts
Student Bank
Overdrafts
Charges on Debit Card Overdrafts
How Bank Overdrafts are Handled in the UK