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Overdrafts.
This service will only be available if you are aged 18 or over.
If you are granted an overdraft, then you are able to spend more money than you have in your account, should you need to. Using an overdraft means that you are borrowing money from the bank.
Many banks and building societies now offer ‘buffer zones’ which are small overdrafts - usually £50 upwards - that you can use as and when you need to without charge and without getting it authorised with your bank beforehand.
Although the buffer zone is free of charge, you may still be charged interest on the amount that you have borrowed. Interest is the money that you pay a bank for borrowing money from them.
Always arrange an overdraft with your bank before you need to use it or you will probably find yourself paying extortionate bank charges and a higher rate of interest.
If your bank agrees to give you an overdraft, they will tell you the maximum amount that they will allow you to withdraw. This is known as your ‘overdraft limit’ and can be anything from £50.00 up to £1000.00 and over.
They will also tell you what rate of interest you are being charged, and what other charges you may have to pay.
An overdraft is not suitable for long-term borrowings, and should only provide a short-term solution to a cash flow problem. It is better to make sure you can survive on the money you do have rather than paying extra to borrow from a bank.
Disclaimer, Target Audience, Jurisdiction Last updated & checked: 30/03/2006