how does a overdraft work?

Question

i hav a £800 overdraft that i havent used yet, but i was wondering how does it work? if i use £100 ov it this month, do i have to pay it back next month? or can i pay it back another time?

Answer 1

Your balance will come down when you deposit more money into your account. With an overdraft the balance fluctuates, and no you don't have to pay it back as long as you want to pay the interest on the o/d and you don't go over the 800 limit.

Answer 2

Basically the bank has allowed you to go overdrawn on your account by £800. If say, you use £100 of your overdraft in a month, you will pay interest on the £100 at the agreed rate with your bank. You do not have to pay the £100 back over the next month. It will be in your own interest not to go into your overdraft, purely because you will be paying interest on the amount that you use of it. Hope this helps.

Answer 3

An overdraft is a form of credit (a loan of sorts). Seeing as you don't know what one is, I am guessing you are new to bank accounts and that this may be a student account.

Most student accounts have overdrafts that are interest free, however standard accounts will charge you for using your overdraft.

What basically happens is that the value of the overdraft is like money in your account. Whenever you put money into your account you will pay off that amount of your overdraft (if you are in it already).

Example: Your account is now £100 "Overdrawn". Think of it as -£100. If you put £50 into your account now, you will only be £50 Overdrawn, i.e. -£50. If you put £200 in, then your account would be £100.

You can stay in your overdraft as long as you want, but beware of interest or other charges for using it!

Hope this helps!

Answer 4

ok an overdraf is a "small" temporary loan by the banks to you that is repayable on demand.
how it works is like this:

your £800 O/D
you get paid £500
total available for withdrawal £1300

your £800 O/D
you spend £500
total available for withdrawal £300

you spend £300 out your £800 O/D
leaving you with £500 O/D available
YOu then pay £600 into your account
making your balance £1100
(from that £600, the bank will automatically put back the £300 you used to go into O/D hence reducing what you would have say if you were to close the account same day ie £300 because the £800 will always belong to the bank

what ever you do bare in mind it is repayable on demand and you must pay interest on it (unless its got an interest free period) so you should spend it with great care especially if you know you don't have the funds to cover it if they ask for it back

also O/D are recorded on your credit report and if you couldn't pay it all at once you'd be paying by agreement with the bank and that too is record, so use wisely

Answer 5

Depends what agreement you have with your bank. I have a permanent overdraft in place which if I needed to use £500 (for e.g) then I can pay it back any time because there is no deadline on my overdraft facility. However, I will be charged interest. Other people may have a temporary overdraft in place which may only be in use for 6 months - in which case any borrowing would have to be paid back before the overdraft expires.
Hope that helps.

Answer 6

Normally an overdraft has to be paid back when the next credit card bill comes or whatever the bank's terms of overdraft repayment. An overdraft is like a credit extension which will incur interest if it is not paid on time.

Answer 7

Normally its the interest amount that you have to pay back on a regular basis. the principal amount ( 100 ov) can be paid whenever you can.

Answer 8

as soon as money goes into your account it pays it so say you spend £200 and then you have £300 going into your account your balance would be £100