Overdraft card - what is it? What does an overdraft bank card mean?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

All individuals and legal entities that have a bank account can, if they wish, apply for a loan in the form of an overdraft. The word "loan" is clear today even to a schoolboy, but not everyone knows what an overdraft account means and why it cannot be called a loan.

Why open an overdraft

If you need to close a hole in the payment turnover, then you can get not a bank loan with huge interest rates, but an overdraft. Suppose you have a bank account, you use it not only to make a profit, but also to deduct certain amounts to the customer. At some point, the required amount was not on the account, and the money must be transferred as quickly as possible. The receipt of funds to your account should occur in a day, but the customer cannot wait. To urgently transfer money to the customer, an overdraft card is used. This type of loan should not be confused with a loan or other financial transaction. Upon registration, a certain type of card is issued - overdraft.

Examples and concrete figures

Tothe term was more understandable "overdraft card", what is it, here's a concrete example with numbers on which you can figure out how this type of loan works.

In the morning, the entrepreneur has 10,000 rubles on his balance sheet. On that day, he goes to the bank and signs an agreement on opening an overdraft limit in the amount of 1,000,000 rubles. Using paper, the entrepreneur gives an order to the bank in the amount of 100,000 rubles. The necessary money is transferred by the bank to the counterparty, including through an overdraft. It turns out that the overdraft entrepreneur owes the bank 90,000 rubles, but he still has 910,000 rubles in the limit, which he can use if necessary.

Suppose the next day an amount of 120,000 is credited to the entrepreneur's account (for example, the counterparty transferred the money). The loan debt in the form of an overdraft is repaid, and the free limit of funds that the entrepreneur can use is restored again. It turns out that the next day at his disposal again the amount of 1,000,000 rubles. Here is a painted example for you, revealing the essence of the question of what an overdraft bank card is.

For what purposes can I spend the limit of money issued by the bank

Practically any bank exercises control over the funds that it gave in loans to a legal entity or individual. If the borrower has his own business, then the overdraft is used to pay bills, pay wages, taxes, make prepaymentsfor work, loan repayments, etc. The bank will not allow you to use the cash limit if you forgot to pay taxes or loans and a pen alty has already been applied to them. If the borrower has such a case, the bank will not even allow him to acquire non-current assets through an overdraft.

Force Majeure or Overdraft Card Debt

It is impossible to predict what will happen tomorrow, how your business will go. If you did not calculate your capabilities and the required amount of money did not go to your bank account, then this is not the worst thing, provided that the bank loan limit was not affected. Overdraft card - what is it in relation to bank debt?

If you nevertheless used this type of loan, and the receipt of money in the bank did not happen before the date specified in the agreement, then the payment can be made in cash at the bank's cash desk. If the borrower has a second account, to which money constantly comes, then you can transfer them to the one where there is an overdraft debt. All transactions are completed within one business day.

When signing the contract, you must clearly indicate the date by which you need to deposit funds. As a rule, this is the 30th day from the opening of the credit limit. Some banks ask to cover the debt by the 20th day of each month, regardless of the opening date of the limit.

On what conditions can I open an overdraft card

To apply for a bank loan, a borrower often needs to have a bunch of certificates anddocuments that confirm his ability to pay. If a large amount of money is required, guarantors may also be required. Overdraft card "Sberbank" Visa Classic is provided without a pledge of property. It is enough for the bank to see your monthly receipts of funds to the account. Based on the amount of cash turnover, a decision is made on how much you will be given an overdraft. It is possible that the creditor will require guarantors, this may be the director of the enterprise, the owner, co-owner and other persons associated with your type of activity.

Who may be denied the issuance of funds

Overdraft card - what is it, is it given to everyone? It would seem that if there is an account that regularly receives a certain amount of money, then why should the bank refuse to issue an overdraft? It turns out that using the account is not enough, you must also have a positive credit history. Before making a decision, the bank will check not just one applicant, but the entire enterprise. If it seems to him that in a couple of months it will be liquidated or will not generate income, then the loan will most likely be denied. In addition, the applicant's current account must have turnover for at least three months.

Although each bank approaches the last requirement based on its own point of view. There are such cases: an important client applied for an overdraft facility, who recently opened an account with this bank, but has had accounts with this bank for many years.other financial institutions. The bank can make a request to those organizations that carry out the turnover of the client's money, and based on this information, make a decision on the credit limit. When considering an application, they are interested not only in the monthly amount of funds that are credited to the account, but also in the frequency with which the money is turned over.

Terms of the overdraft agreement

If the result is positive, an agreement is drawn up with the borrower for 180 or more days. Every 30 days, the amount on the account must be replenished in order to cover the overdraft debt. With full repayment of the debt to the bank, the borrower has the right to terminate the contract. It is also allowed to draw up a new agreement after 180 days. The interest on such an agreement has always been less than on a bank loan. The conditions for granting an overdraft are much more loyal, since interest for using money is charged only on the balance of the debt at the end of the working day.

With the resulting debt, the bank has the right to demand its money as soon as possible, and if you have such a situation, then a black list and a bad credit history are provided to you. Overdraft is given in one currency, one borrower and one bank.

The best loan

Overdraft card - what is it for the borrower: benefit or debt hole? Often a person cannot plan his expenses, and when he receives a salary, he starts buying a bunch of unnecessary things. At the last moment, he recalls that the most important thing has not been acquired, and not allpayments are made on time. You can turn to relatives and friends for help, but not everyone has such friends who can freely lend the necessary amount of money for several weeks.

Not everyone likes to lend money. Many are guided by the following principle: if you want a person to leave your life, lend him money. Why test the theory in practice, it is better to simply refuse debt, referring to difficult financial times. Why take a detour when you can borrow from the bank for the same couple of weeks, and even at low interest.

Overdraft as a type of lending

What does an overdraft bank card mean? This phrase is translated from English as "over-account". All over the world, this service is gaining popularity every year not only among businessmen, but also among the ordinary working class. You can independently calculate what limit the bank can open for you if the application is approved. The overdraft amount will not exceed the average salary of the applicant for three months. If the contributions are of a regular nature, then the client can withdraw money from the account until the agreement expires.

What does an overdraft card mean for an individual? Any working person's salary is transferred to the card. If the bank decides to open a credit line, this implies that the overdraft will be covered by salary. In the event of dismissal of an employee, the overdraft will have to be repaid in full within a fewdays.