Getting into the red and realizing that you don’t have the money to pay every month’s bills can happen more often than you think. When this situation arrives and things start to tighten, the easiest exits are the revolving credit card and overdraft, but they are also among the most expensive, meaning what will help on the one hand can hurt on the other.
Compare Overdraft Limit and Credit Card Revolving
According to experts, the ideal is that before you choose which type of loan to make, make sure that you can pay this amount in less than 30 days or if you need more time to settle this debt. If the payment is short term, it is best to use the overdraft limit, as the interest is much lower than the revolving credit card.
Track the difference in amounts charged by revolving credit card and overdraft at major national banks. The table below is just a basic representation of interest, but may change according to each customer profile.
What is Revolving Credit Card Credit?
This is the limit available for customers to use on their credit card. When purchasing the card, the customer is informed of the amount that can be spent, defined according to the card’s bank or banner. When the customer has access to the invoice of the month, he has the option to pay all or use the installment of the invoice, which is another function offered by the card.
Care must be taken when deciding to use revolving credit.
This is why it is called a revolving credit, because the customer may choose to pay off some of the debt and leave the remaining debt to pay in another month.
What is Overdraft?
This is the limit pre-approved by your bank. If this amount is available in your account, it can be easily used. Therefore overdraft can be a risk of ending in red.
Remember that the interest charged on this type of loan is usually not low and if the agreed date is not in the account, the rate will be even higher.
How to decide which one to choose?
It is important to know that both options have very high interest rates, especially if compared to other credit options. This is one of the reasons that should be researched which is the best alternative for your need and your pocket.
To choose between one and the other, it is best to look for information from the bank and see which interest rate will be lower and how long it will take to settle this amount.