Question about student accounts and overdrafts Watch

TerribleGrades
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So as far as I'm aware there is no
specific time you have to pay your overdraft, but if you do have a wage/income coming into the account this will automatically go towards paying your overdraft?

so my question is as long as you pay your overdraft constantly and get it back to the original, say I had a £500 overdraft and used this but paid this back.

Will I then be free to use that overdraft constantly in a month as long as I keep paying it back? OR are overdrafts restricted to that set amount per month, which means once you use your overdraft and pay it back you can't use it again in the same month?

also can you go over your overdraft limit or is this capped (to prevent overspending?)

This is a HSBC student account with 0% interest.
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Milax1x
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You’re usually assigned a maximum amount per year. Some student accounts the amount increases every year and then the account automatically becomes a post grad account which allows for more overdraft. Overdrafts should only be seen as absolute last draw emergencies not something you should be using as part of your monthly budget
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TerribleGrades
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(Original post by Milax1x)
You’re usually assigned a maximum amount per year. Some student accounts the amount increases every year and then the account automatically becomes a post grad account which allows for more overdraft. Overdrafts should only be seen as absolute last draw emergencies not something you should be using as part of your monthly budget
Hi, so what's the answer?

I'm just wondering as I've never had an overdraft before, but I'm very careful with my money which I why I am asking these questions so I know how to use overdrafts wisely, if I ever do decide to 'dip' into them. I was actually very reluctant to get a student acc but it's good to have something for emergencies like rent or something, but for that I need to know how it works so I don't fall into a pitfall.
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Milax1x
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(Original post by TerribleGrades)
Hi, so what's the answer?

I'm just wondering as I've never had an overdraft before, but I'm very careful with my money which I why I am asking these questions so I know how to use overdrafts wisely, if I ever do decide to 'dip' into them. I was actually very reluctant to get a student acc but it's good to have something for emergencies like rent or something, but for that I need to know how it works so I don't fall into a pitfall.
An overdraft is essentially a loan.
If you and the bank agree to the overdraft (you have to do this prior to taking it) then it will be at 0% on student accounts. If you take the overdraft without permission you’ll get hammered by interest.
Read the fine print as the 0% interest can turn into a mess real quick. Some accounts are 0% only until a certain time I.e 3 months after the loan and then you get charged interest. Your best bet is to go into a few bank branches and speak to a manager about the accounts.

Remember you need to take the number UCAS gave you to be able to open a student account
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TerribleGrades
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(Original post by Milax1x)
An overdraft is essentially a loan.
If you and the bank agree to the overdraft (you have to do this prior to taking it) then it will be at 0% on student accounts. If you take the overdraft without permission you’ll get hammered by interest.
Read the fine print as the 0% interest can turn into a mess real quick. Some accounts are 0% only until a certain time I.e 3 months after the loan and then you get charged interest. Your best bet is to go into a few bank branches and speak to a manager about the accounts.

Remember you need to take the number UCAS gave you to be able to open a student account
Thanks, but you are already telling me what I know and side-stepping my actual question. Thanks anyways.
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martin7
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(Original post by TerribleGrades)
So as far as I'm aware there is no
specific time you have to pay your overdraft,
Bear in mind that overdrafts are normally "payable on demand", so a bank has the right to remove it at any point.

but if you do have a wage/income coming into the account this will automatically go towards paying your overdraft?
The amount of your overdraft that's in use is the amount that your balance is less than zero. So if you're overdrawn by £50 (i.e. your balance is minus 50 pounds) and you pay in money, then that money is reducing your overdraft. If the amount you pay in takes your balance to a positive amount, then at that point you're no longer using the overdraft.

so my question is as long as you pay your overdraft constantly and get it back to the original, say I had a £500 overdraft and used this but paid this back.

Will I then be free to use that overdraft constantly in a month as long as I keep paying it back? OR are overdrafts restricted to that set amount per month, which means once you use your overdraft and pay it back you can't use it again in the same month?
You can go into your overdraft and back out again as much as you want. If you have an overdraft which incurs fees and/or interest, then it's obviously best to avoid using it (or to use it as little as possible). This doesn't apply to you as you have a 0% interest rate on your overdraft.

also can you go over your overdraft limit or is this capped (to prevent overspending?)
It will depend on the terms of your account; but you should assume that it's not capped and that you can go over your overdraft limit. If this happens, you should expect to pay charges and interest.
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DMidds96
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(Original post by martin7)
Bear in mind that overdrafts are normally "payable on demand", so a bank has the right to remove it at any point.



The amount of your overdraft that's in use is the amount that your balance is less than zero. So if you're overdrawn by £50 (i.e. your balance is minus 50 pounds) and you pay in money, then that money is reducing your overdraft. If the amount you pay in takes your balance to a positive amount, then at that point you're no longer using the overdraft.



You can go into your overdraft and back out again as much as you want. If you have an overdraft which incurs fees and/or interest, then it's obviously best to avoid using it (or to use it as little as possible). This doesn't apply to you as you have a 0% interest rate on your overdraft.



It will depend on the terms of your account; but you should assume that it's not capped and that you can go over your overdraft limit. If this happens, you should expect to pay charges and interest.
I am also curious about the original questions asked as I feel it is a good question, however I still don’t feel like this has answered the issue at hand?

To put it simply can you explain if the situation is A or B please?

A) Your overdraft limit is £1000/year So the whole amount you can borrow each year is capped to £1000 regardless of your monthly ingoings & outgoings?

OR

B) Your overdraft account must end each month & year on the £1000 cap, meaning that if you borrowed £1000 but then paid back £600 (leaving your account balance at -£400) you would then be able to borrow another £600.. etc etc? In this instance the overdraft limit is £1000 but the ammount you can borrow in a year is technically limitless as long as you pay it back and never allow your account to go over £1000?

Or another way to ask would be to say does it work as a credit card works?

For example if the cap is £1500 on my credit card, I can continuously pay back money and then borrow it again. There is no yearly ‘borrow’ limit.

Thank you

If you don’t know please just say that, as I understand all the other terms of the overdraft including it’s intended purposes, what interest means etc.
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martin7
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[QUOTE=DMidds96;79401172B) I am also curious about the original questions asked as I feel it is a good question, however I still don’t feel like this has answered the issue at hand?

To put it simply can you explain if the situation is A or B please?
[/QUOTE]

Well, it's not really A or B as I understand what you're describing.

If you have a £1000 overdraft limit, you must make sure that at no point does your balance drop below -£1000. The calculations are done on a day-by-day basis, though any charges are likely to be applied monthly (but calculated on a daily basis).

Bear in mind that transactions don't necessarily get recorded on your account the same day you make them.
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sophia5892
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It’s B.... although that’s a weird way of explaining it! Martin7 put it quite well.

Essentially in one single month your balance could be:
-£600
£500
-£900
-£400
£1500
-£200

And so on, with no problem at all. So I guess in that sense it’s similar to a credit card. As long as the account never has a balance of less than -£1000 then you’re fine.

I’ve always thought of my overdraft as more of a buffer or reserve that I can temporarily dip into than a loan that I pay back.

And as Martin7 said - be aware that transactions may not show up same day. 0% overdrafts are great but you don’t want to risk accidentally going over it and getting stuck with fees!

In terms of your question about how the overdraft is paid, any money put in your account will pay it off as it’s part of your account balance. Say you have £300 in your account. Your account should show as:
Current Balance: £300
Available Balance: £1300 (the 300 you’re in credit plus your available 1000 overdraft)

Your bank might call them something slightly different. But you should see the two amounts when you check your account.

If you were using your overdraft the figures might look like
Current Balance: -£300 (so you’re “in your overdraft”)
Available Balance: £700 (you have 700 of your overdraft left to use)

Hope that makes sense!
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niteninja1
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So essentially if they say you have a £1000 overdraft. Your account can be -£1000 you then get paid £200 that makes you -£800 meaning you have £200 of the overdraft left.

Provided the bank doesnt ask for it back early etc
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