Using an Overdraft Wisely

 

As magic as women’s handbags are, they are not so good at conjuring up money, especially when it’s a week until payday.

 

“Oh, dear.”

 

Of course, there are different types of credit that can help stretch your finances. Let’s look at overdrafts.

 

“Oh.”

 

It’s the Overdraft Fairy Godmother.

 

“Ha! Ha…I’m rich! I’m rich! Ha! Ha! Ha…”

 

“It’s you. She’s a funny one.”

 

Lovely! But remember there are two sides to every credit story.

 

“Tell us, Overdraft Fairy Godmother.”

 

 “You’re not rich. You’ve just overdrawn. And you need to know how to manage it. Make sure that it’s already authorized with your bank. Make sure you know your agreed limit. Make sure you know how much interest you’ll be paying. And remember this isn’t free money. you still have to pay it back. And be careful, an overdraft can easily spare out of control. And you’ll be visited from the evil Overdraft Fairy.”

 

An overdraft can be very useful in the short term for things like an emergency. However, as overdraft interest rates can be pretty high, it may not be useful in the long term. And your bank could make you pay it back anytime in full.

 

“Ha, now you are mine.”

 

“Be wary of the evil Overdraft Fairy.”

 

“Don’t. Not my things.”

 

“If you got to know your agreed limit, your overdraft becomes unauthorized.”

 

This means you could be charged fees, higher interest rates, or both. If you find you slip into unauthorized overdraft or going overdrawn frequently, you could look at: Getting a better deal on your current account, interest-free overdrafts, a loan or credit cards.

 

“You belong to me. Ha! Ha! Ha! Ha.”

 

The moral of this story is having an authorized overdraft can be useful, but there may be other forms of credit that could offer you a better deal and save your money in the long term.

 

“I’m not always an evil, you know.”