The upcoming Christmas and New Year’s Eve is the period in which we spend the most throughout the year. If we earn enough or take care of some expenses earlier, then we have nothing to worry about.
However, it is impossible to predict every expenditure. In the absence of cash, the credit limit in a personal account can be a salvation. Cheap, fast and easily available!
Revolving loan, overdraft, credit limit
They call this service various. Most often we will meet the terms: revolving loan, overdraft, credit limit. The meaning is always the same. This means constant access to additional cash directly from our account. Without visiting the bank. Most Polish financial institutions have it on offer.
The credit limit is granted at the client’s request. Sometimes, however, sometimes banks will offer it to us, especially if we transfer the account from the competition. How much money we get is an individual matter.
Our monthly account inflows are the main factor taken into account when calculating the maximum credit limit. On average, we can count on at least several thousand USD – a multiple of our salary.
How it’s working?
The credit limit is additional cash that increases the balance of our account. For example, if we have USD 1,500 on our account and our limit is USD 2,000, the total balance of our account will be USD 3,500.
If we happen to spend our own 1,500 before the end of the month and the next payment, we will not have to worry about the lack of cash because we will have 2,000 USD at our disposal.
Now, as before, we can make transfers or pay by card. However, it should be remembered that this is no longer our own funds, but the bank’s money, for which we will have to pay interest.
As soon as we receive our salary account, the used part of the loan will be automatically repaid. What’s more, when paying off the entire debt, we will still have the entire credit limit available.
What about these interest rates? This is a great plus for revolving loans. They are calculated only on the amount we use and only for the time we were indebted.
If, for example, at the end of the month we used the USD 300 limit and we maintained such debt for six days, then interest will accrue from USD 300 for 6 days. Not for the whole month and for the maximum amount possible to use.
Unfortunately, there is nothing for free. A commission is also charged on this form of loan. Most often it is a fixed one-time payment per year. Its amount ranges from 0% to 3%. If we want to extend our credit limit for another year (usually it happens automatically) then the commission will be charged again.
It’s still less than a cash loan commission. It may amount to as much as 5%, and frequently encountered “0% commission” promotions are usually subject to the requirement of credit insurance, which compensates the bank for the lack of commission.
As for the interest rate, in the worst example, it may amount to 24% (Bank BPH), however, it is 10-15% by default – which is less than the interest rate on cash loans.
Every account is a different offer …
The revolving loan offer may differ not only depending on which bank we choose but also which account. It makes no sense to compare offers that hide behind prestigious accounts, and online accounts – by definition free. Therefore, in our statement, we have included the cheapest and possibly the most similar bills.
It is worth noting that many banks reduce the interest rate on the credit limit for the first year after we transfer our account to them.
This is what Honest Bank does, for example, in which the standard interest rate on a revolving loan is 18%, but if we move here from the competition, we can negotiate the interest rate from 10%!
In a large part of the offers, we deal with a range. It should be noted that usually the higher the limit, e.g. 50 thousand, the lower the interest rate. One of the exceptions is the Good Finance offer on the Comfort Direct account. If our utilized limit does not exceed USD 1000, the interest rate will be 0%.