Have you ever run out of money before the end of the month? Have you ever needed to make an emergency purchase but didn't have enough funds? In these situations, an overdraft facility from your bank can be an absolute lifesaver.
What is an Overdraft?
An overdraft is a financial arrangement between you and your bank that allows you to spend more money than you have available in your account. It’s kind of like a loan that you take out from your bank when you need it. An overdraft is a form of credit but differs from a loan in that it is not a lump sum of money, and you only pay interest on the amount you use. In other words, it's a line of credit that kicks in when you've spent all of the money in your account.
How Does FNB Overdraft Work?
First National Bank, FNB, offers a flexible overdraft to qualifying customers. Here are the key details you need to know about how it works:
Eligibility:
To qualify for an FNB overdraft, you need to have an active FNB gold account, platinum account, or Premier Select account. You also need to have a regular income and be over 18 years of age.
Limit:
The bank will determine your credit limit based on your salary and spending habits. Typically, the limit is between R500 and R40 000. However, this may vary depending on your financial status and credit score.
Interest and Fees:
You will only pay interest on the amount you use; the interest rate charged can vary from one customer to another based on their credit score. As of May 2021, the interest rate ranges between 8.5% and as high as 25% per annum.
FNB charges a once of initiation fee of R165 and monthly service fees of between R53 and R65. The bank may also charge fees for exceeding the overdraft limit and other services.
Repayment:
You don't need to make a fixed monthly repayment, but you do need to keep your account in good standing to keep the overdraft facility open. The bank requires minimum deposits into your account each month to prevent accumulating debt.
It's important to note that not all bank accounts have overdraft facilities, and the criteria for approval may vary from one bank to another.
The Benefits of Using an FNB Overdraft
The advantage of an overdraft is that it's a flexible form of credit that can help you manage your cash flow during times of financial stress. Here are some benefits to using FNB's overdraft:
- Easily accessible funds for when you need them
- Only pay interest on the amount you use
- Quick and easy application process
- No need to worry about costly bounced payments
- Establishing a good credit score through responsible use of the facility
In Conclusion
If you're a qualifying FNB customer, an overdraft can be a useful tool to have at your disposal. However, it's crucial to use it responsibly and ensure that you don't exceed your credit limit. By doing so, you can avoid facing high charges and falling into a debt trap. Always be mindful of your finances and keep track of your spending to ensure that you don't overextend yourself.
