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Should I Have More Than One Overdraft?

There are some people that have more than one overdraft and so it might be something that you could be considering. It is worth taking care to consider this sort of thing carefully as there will be advantages and disadvantages and you need to be sure that it really will be the right thing for you to do.  

Advantages of Multiple Overdrafts

If you have more than one overdraft it means that you will have access to more money. You will be able to borrow more if you need it. It means that if you have an emergency, then you will have access to a lot of money that you can spend. It also means that you will be able to feel more relaxed knowing that there is this money available for you. It could mean that if you do spend a bit of it, there will still some left over and so if you have a series of occasions when you need money, it means that you will have what you need available for you. You may also find that the rates of interest are different and so you could potentially use the cheaper one and then if you use that one up, then you can switch to using the more expensive one and then you will be able to borrow at a cheaper rate and therefore save some money that you would otherwise be paying out in interest.

Disadvantages of Multiple Overdrafts

Having access to more money can sound like a good thing because it means that you will be able to spend more and you will more available if there is an emergency. However, there is also more potential to pay out a lot more money in interest. An overdraft can be an expensive way to borrow money and this means that you will be paying out between about 35% and 40% interest when you use an overdraft. There are other loans that are cheaper than this. However, as you already have the overdraft arranged and it is so convenient and quick to use the money, you may just use it without bothering to think about the fact that you could get a better deal elsewhere. Also, the convenience also means that you are likely to just quickly dip into the money without taking the time to think about the consequences and costs of doing so.

When you have two overdrafts it will mean that you will need two current accounts. Normally with an overdraft, you will repay it when money comes into the account. So, when you get paid or your pension or benefits go into the account, they will repay the overdraft. If you have two overdrafts then this money will only go into one account. This means that the other one will not be repaid and therefore it could last for a long time. All the time that you have the overdraft, you will be having to pay interest on it and this means that you will have expenses. These would not exist if you did not have that second overdraft. Therefore, it is well worth thinking about whether having two is a good idea. It could be better to see whether you could extend the one that you have. If the reason for getting a second was because it was cheaper than your current one, then it could be a better idea to move it all over to the cheaper one and run your current account completely from there and then you will know that the overdraft will get paid off when you get money coming in to the account.