Today it is very common to have one or more checking accounts. Possessing money in the bank is perhaps the most comfortable way to make payments and access a series of advantages. How to have a debit or credit card, pension plans or insurance, among others. But sometimes the inevitable happens, having an overdraft in your checking account due to lack of funds. What consequences can it have? How can we avoid it?
Have an overdraft, what is it?
It occurs when a bank account runs out of funds for different reasons. It may be due to the charge of receipts or because the commissions associated with the account are undermining the balance if it is not abundant. It is popularly known to have an overdraft to "be in the red."
Usually when this happens, or even before it happens; the banking entities notify the customer that the payment of an upcoming receipt will generate an overdraft. Mobile apps are responsible for generating an alert. Notifying the client of the proximity of this situation and of the need to provide a balance to the account.
Consequences of having an overdraft in your account
This statement is not free for the customer of a bank; being with a negative balance implies the collection of interest. Each bank has its own rules to calculate how much money to collect. Although if the overdraft occurs for only a few hours, generally no type of charge is applied. It is not only an economic burden for the client, it is also an economic burden for the financial institution, which has to cover this lack of liquidity with its own funds .
The lack of balance in the account does not have more actions than the merely economic ones. Always according to criteria established by the Bank of Nigeria. The APR applied to an overdraft account cannot be 2.5 times higher than the interest on the money at that time. For this 2020, the interest in our country is set at 3 percent.
How to avoid taking an overdraft into account
Anticipation is the best way to avoid going through this trance. These are some of the most successful tips that can help you cover your back:
- Periodically monitor the account: Being very planners is one of the ways to know what we are going to be charged in the account and when.
- Maintain a remainder: We must avoid leaving the checking account with a low balance; establishing a minimum that we must not pass. This minimum must be applied taking into account the economic capacity of each one. For some people it may be 50 euros, others will require larger amounts.
- Lighten expenses: You may be paying for products or services that you really do not need or that have ceased to interest you. Subscription to a magazine that you never read due to lack of time or a gym fee that you no longer go to. In addition to helping you save , it would prevent you from having a greater chance of overdraft.
- Activate notifications in your banking app: These applications are very useful when it comes to controlling our money. Since we can activate notifications if the balance falls below a specific amount.
As you can see, taking an overdraft into account is no small matter; since we are generating an expense that goes against us. Surveillance is the most effective way to keep our accounts healthy.