Overdraft limits start typically in the range of a few hundred pounds. In order to pay main repairs to their property or unexpected bills, consumers who require an overdraft will take a limit of around £500 to a few thousand pounds. No matter the available maximum overdraft limits on the market, the lender will require to the consumers who hold an account to pay back the entire loan along with any extra overdraft charges and interest rates.
The objective of an overdraft limit is to dissuade consumers to spend more than what they can be able to pay back. However, exceeding overdraft limit comes with big consequences for the account holders. If a consumer withdraws money beyond the limits, the provider may charge higher rates of overdraft on the whole amount instead of charging only on the amount the exceeded the limit. In addition, extra charges for exceeding overdraft limits may also damage the consumer’s wallet. These additional charges called unauthorized overdrafts are more expensive and may result in a bad score for credit rating of the consumer.
With these unauthorised overdraft charges, the lender calculates rates daily on an unplanned overdraft. This will result in a big amount for the borrower to pay. Different other bank charges of overdraft will also contribute to this expensive bill such as arrangement fee when setting up first an overdraft facility and monthly usage fee. It is also possible for the lender to add fees for business overdrafts such as the amount of money leaving or entering the account during a determined period.
There are also some overdraft charges that are unfair. This happens when lenders request fees not mentioned on the contract. The law requires to all financial providers to treat their clients fairly. If you are a victim of unfair overdraft charges, you can write to your lenders and explain any financial hardship you are facing and how these charges affected your financial state. Such claim can be a long process particularly if the lender or the bank refuses to hear you. You can contact a financial expert to help you.
The best way to avoid such unpleasant charges is to stay within the limits of overdraft. Exceeding such limits brings stiff penalties and you will pay more money aside the entire loan. You will have a bad credit score that will make it difficult to obtain another loan in the future.