When it comes to Australian bank account comparison, one of the terms that you may encounter is the overdraft. This refers to the line of credit which cares for your transactions once your Australian bank account balance is not enough or becomes negative.
Things to Consider in an Overdraft
It becomes beneficial when you need to cover transactions and your salary has not been credited yet. It addresses short-term issues on your cash flow so you can work things out even though you don’t have enough on your bank account. As long as you pay for the overdraft as soon as possible, you will not have any problems.
An overdraft can be considered unarranged if you access more money than what you actually have in your account. On the other hand, an arranged overdraft is linked to your personal bank account. There are also limits on how much money you can withdraw. For a personal overdraft, the limit can start at $500. For a business overdraft, the limit can reach up to $10,000 or more.
An overdraft fee may be imposed on the amount that is overdrawn. There may also be a monthly service fee – it really depends on what overdraft you have as well as your bank. Some banks may not ask you to pay an overdraft fee if you have a good credit standing with them and it is your first time to access more money than what you actually have in your Australian bank account.
How to Manage an Overdraft
Overdraft has its own benefits and drawbacks. The key is to better manage it to avoid inconvenience. How? Know your spending patterns so you will know how much money you need for a certain month in your Australian bank account. You can choose the lowest overdraft limit possible so you will not be tempted to spend more than what you can afford. Also, make sure to pay your debt immediately and as much as possible, avoid lending your overdraft to others, or you might end up owing more money or losing your assets. Banks vary in their terms and conditions for the overdraft, so it is ideal to compare bank accounts and choose one based on your needs and financial situation.
When it comes to an overdraft, watch out for the various fees which can include the establishment fee, service fee, as well as interest. You also need to check your ATM balances as the available balance may be inaccurate due to recent transactions that are not yet reflected in your account.
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