Should I Increase my Overdraft Limit?
When we have an overdraft, we are given a certain limit. This is how much money we are allowed to borrow using the overdraft. The amount that we are given will vary. It could change depending on the bank that we have our account with and also with our own credit record. However, at times, we may have an opportunity to increase our overdraft limit. This could be because the bank we have our current account with is offering us the opportunity to do this or it could be because we have found an alternative account which offers a larger one. Either way, it is wise to think about whether it is a good idea to increase ethe overdraft limit or whether you should keep it as it is.
Consider why you want it bigger
It is good to start by thinking about the reason why you want the overdraft to be larger. Think about whether it is a good or bad reason. If you are worried that you might have an emergency and need more money, then it could be a good idea. If you want to borrow more money so that you can help pay for necessities then perhaps it is okay, but if you are looking for extra money to pay for luxuries then it is a good idea to no have one. This is because you need to think about the cost of the overdraft. Often it can be as much as 40% interest on the overdraft and therefore you need to think about whether that cost is worth it.
Can you afford a bigger one?
This interest may not seem a lot when it gets added on monthly, but you need to think about how much it will cost you in total. Is it money that you can actually afford to pay out? Consider how much you pay for things and whether you really want that much money to be going towards just paying the bank when you could have it for spending. It is also worth thinking about how you will feel about having a larger overdraft and whether you feel that you will be able to cope with the thought that you owe that money. Some people get really stressed when they owe money and if this is the case for you, then owing more money could be something that you want to avoid.
Will it Actually Benefit you?
It is also worth thinking about whether the overdraft will actually really benefit you. Consider what you are going to be using it for and whether it is worthwhile. Think about the cost that it will be and whether you think it will give you good value for money. It is good to also think about whether you might just use it as a way to spend more money than you have without any real thought for how you are going to manage that. Remember that you will need to repay it, it is not money that you are entitled to and you will be charged for using it. You need to think carefully about the consequences of this.
It might seem like quite a small decision, but you actually should think very carefully about this. It could mean that you will end up with lots of debt to repay and it could leave you feeling stressed. You need to carefully weigh up the pros and cons and make sure that you are really sure about doing it and that you feel it will be the best thing for you to do right now.