Banking Overdrafts
Information
Within banking/the financial services sector in Ireland, an 'overdraft' is an additional amount of money that can be drawn from a current account when it is in debit. (In other words, an additional amount of money drawn from your account when it is below zero). Overdrafts are generally a short-term facility used to temporarily increase cashflow and allows you to spend more than you have in your current account. Although interest rates on an overdraft can be high, you are only paying interest on the amount of money you withdraw.
Rules
In Ireland:
- Overdrafts are available on current accounts only.
- Overdraft facilities are provided at the discretion of an individual financial institution.
- An overdraft and the amount that will be granted to a consumer in the form of an overdraft, in most cases, depends on the history of transactions in the current account. If a customer has a bad credit history, he or she may find it difficult to obtain an overdraft.
- The consumer pays back the amount overdrawn and the interest on the amount overdrawn (which tends to be lower than on a term loan) when the funds become available in the account.
- Overdrafts can be temporary or permanent.
If a current account has regular incomings and outgoings, then a bank will usually grant an overdraft to a customer. If money going into an account is withdrawn almost immediately and is not held in the account for any significant amount of time, then the bank might not grant an overdraft as it could see this as an inability to repay.
If you are having difficulty paying back an overdraft
If you are having difficulty paying back an overdraft, you can ask for a time extension from the bank. This will be granted if your payment history is satisfactory.
If you continue to experience difficulty in paying pack the overdraft and are getting further and further into debt, you can contact the Money Advice and Budgeting Service (MABS). This organisation will consult with you and establish how much money you can afford to pay back per month. It will then contact the bank directly on your behalf. MABS will arrange with the bank for you to pay back a certain amount every month until the overdraft decreases and the debt is cleared. MABS offers this service free of charge.
Rates
There is usually an annual fee of approximately 15 euro for an overdraft facility.
The amount that an account can be overdrawn (limit) is agreed in advance between the current account holder and the financial institution.
Interest is charged daily on an overdraft. The interest rate varies from one financial institution to another and can change daily. The amount of interest paid is dependent on how much the account is overdrawn by and for how long.
How to apply
You should contact your bank or building society if you wish to find out about overdraft facilities. Applying for an overdraft includes filling out a form and can also involve meeting with the financial institution's officials. Some institutions have 24-hour help lines that take applications over the phone. Some institutions also have web sites where applications can be made online.
Language
Related Documents
- Dealing with Debt
Debts can very easily get out of control. Advice and information from MABS on the the steps you need to take to help manage debt problems. - Comparing interest on savings and loans
If you borrow money from a financial institution you will be charged interest. If you save money in a financial institution you will earn interest. Find out about the different terms used for interest charged or earned. - Overview of mortgage debt
Information for people facing mortgage arrears.
Contact Us
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 9pm) or you can visit your local Citizens Information Centre.