Understanding Overdrafts

What is an overdraft primarily used for?

• Unexpected expenses

• Paying off credit card debt

• Daily shopping

• Long-term investments

How does an arranged overdraft differ from an unarranged overdraft?

• It does not require any credit check

• It usually has lower fees and interest rates

• It is set up without any agreement with the bank

• It is only available to people with poor credit history

What is a potential consequence of using an unarranged overdraft?

• Higher fees and interest rates

• Lower interest rates

• No impact on credit score

• Automatic increase in credit limit

Why is it important to use overdrafts responsibly?

• They are a form of income

• They are interest-free

• They increase your credit score

• They can lead to a cycle of debt

What is a key warning about relying on overdrafts?

• They are the best way to manage financial difficulties

• They should not be relied upon for long-term financial management

• They can lead to financial stability

• They are a reliable long-term financial solution