What is an overdraft and how does it work? | Millennial Money

In this #MillennialMoney video, Lauren talks about overdrafts including what they are and how they work.
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#whatisanoverdraft​ #overdraft​ #howdooverdraftswork

[@ernestmfakudze]

Thanks Lauren, very useful information. So how come banks allow unauthorised overdrafts? In my humble opinion, and to protect me as the customer from getting into debt, I think the transaction should be declined if I try to spend what I don't have.

[@adolphfan2236]

Very helpful thanks

[@Moneytothemasses]

Glad it was helpful!

[@user-nm7ju9hu4w]

If we pending to pay for interest what happen for the fix overdraft

[@ricolasbest6861]

Should I apply for an overdraft only just in case I go over, and not actually use it? How does this overdraft among look on the credit report? Would it be a loan (even if I don't use it) or revolving credit account?

[@Moneytothemasses]

Hi, Having an arranged overdraft in case you go overdrawn is sensible as the penalties for an unarranged overdraft can be more severe. In terms of how an overdraft is viewed, potential lenders can see if you have an arranged overdraft in place, what your limit is and how much of your overdraft you are using. As such, an arranged overdraft is unlikely to have a major impact on your credit rating, so long as you manage your account and overdraft well, in fact, a well-managed arranged overdraft can actually help build your credit score.

[@SpiritDrivenAudioLLC]

😍

[@maiasuga]

I've been banking since 2022 and I am confused of the concept of overdraft...how can you spend more money than what you have in your bank account? example; I want to buy something that is £50 but I only have £40 in my account. Has it got something to do with current balance/available balance? thanks

[@gabrielakec739]

A to Capitalize

[@alancorrea9161]

Never accept or authorize an overdraft because basically its a trap !!!

[@gabrielakec739]

How to get out