If you have any loan, then you might consider switching it occasionally to a lender that is cheaper. This will make the loan less costly for you. However, when it comes to overdrafts, we are much less likely to switch to a different one. This can be because it will seem like a lot of hassle, but it can be well worth it.
Rates Can be Better
There are lots of places that offer overdrafts and they will charge different amounts for them. An overdraft will typically be between 35% and 40%. Although both figures are pretty high, that 5% can make a big difference. Therefore, if you move to having an overdraft with the cheaper one, you could end up paying significantly less money for it. However, it is worth bearing in mind that overdraft rates are variable rates of interest. What this means is that they can be changed by the lender at any time. So, switching to a cheaper rate may not last, if the rate gets put up. You could end having to swap again so that you can return to the lower rate. However, this may not be that often and it could be worth it. It really can depend on how often you use the overdraft and how much for. If you rarely use it then you will not spend that much more, but if you use all of the time and borrow a lot of money, then it could make a really significant difference to you. You might be able to do some calculations to work it all out and that will help you to be able to decide whether you will spend significantly less or whether it will not really be worth it.
Banks Help with the Switch
It can feel like a hassle switching overdrafts because you will have to move your current account to somewhere else. This means moving all payments you have coming in, direct debits and standing orders which can be a lot of hassle. However, banks are supposed to help you to do this so that it is not such a difficult and daunting task. Some people also do not switch over completely but keep two accounts running. This can be extremely tempting as then you will have two overdrafts to use, but try not to do this as if you have no income going into an account that is overdrawn, it will not get repaid and this will mean that you will have to keep paying the interest month after month. It is therefore better to switch completely or not at all.
Might be Able to Borrow More
When you move to a different bank, you could fid that they will allow you to have a larger overdraft than the place that you were with previously. This can mean that you will be better off as it means that you will have more money available to fall back on should you need it. Of course, this might not be an advantage to everyone. You might find that you will be tempted to treat yourself with this money and spend it on things that you do not really need. This will then be expensive as you will pay interest on the money until you repay it. It is best to leave overdrafts to use only in emergencies.
It is a personal decision as to whether switching will be worthwhile. It is not always easy to pick either and so you should be thinking about whether it is something that will advantage you, by giving you less interest to pay or whither it will actually be a disadvantage as you might be tempted to spend more money because you can borrow at a cheaper rate. So consider what sort of a spender you are alongside thinking about the cost.