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Why You Should Avoid Using An Overdraft
Commonwealth Bank
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Credit cards, home loans, personal loans, car loans, buy-now-pay-later furnishings, we're a nation up to our ears in debt and it's not hard to see why. We've moved from a savings based society where generations ago, if you couldn't afford it, you simply couldn't have it to a society of credit where we seek instant gratification for practically every wish we can think of.
Contributing to the problem is the fact that the big banks love us to stay in debt. Proof of this is the number of credit cards, personal loans and overdraft facilities such as Commonwealth Bank's Streamline Overdraft that seem to be promoted everywhere we look.
Commonwealth Bank (CBA) offer an overdraft limit of up to $5,000, which can be linked with a Streamline transaction account.
Do you find there's too much month at the end of the money? With an overdraft facility such as CBA's Streamline Overdraft, you could overdraw the money you have in your everyday transaction account. Sounds like easy money? Think again. Using an overdraft facility is unadvisable, as the money you overdraw is effectively on loan from CBA, which means when you repay it, you will be charged interest.
If you find yourself tempted by the easy money of an overdraft such as CBA's Streamline facility, consider your alternative options. Firstly, do you really need the extra money? A brand new plasma TV is not likely to be worth driving yourself into further debt. If you need extra cash to put towards your assets, e.g. to perform maintenance that will add value to your home or increase your wealth in the long term, consider whether you can access a redraw facility on your home loan. The interest rate offered by your home loan will be far lower than the hefty interest charges you would face by using CBA's Streamline Overdraft.
The Streamline Overdraft facility provided by CBA is promoted as instant access to money when you need it. A better alternative to this is to have some form of emergency savings so you can tap into your own money when needed, rather than depend on credit and be faced with interest charges.
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