Understanding Overdrafts

What is an overdraft primarily used for?

• Paying off mortgages

• Daily shopping

• Unexpected expenses

• Long-term investments

How does an arranged overdraft differ from an unarranged overdraft?

• It is set up without the bank's approval

• It is only available to businesses

• It is pre-agreed with the bank

• It has higher fees and interest rates

Which type of overdraft typically involves negotiating terms with the bank?

• Unarranged overdraft

• Arranged overdraft

• Emergency overdraft

• Temporary overdraft

What is a potential consequence of frequently using an unarranged overdraft?

• Increased savings

• Cycle of debt

• Lower interest rates

• Improved credit score

Why is it important to use overdrafts responsibly?

• To qualify for more loans

• To improve your credit score

• To avoid high fees and interest rates

• To increase your bank balance