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There are many kinds of credit lines available in the market. They are used by both corporate and individual customers. These are short term loans and overdrafts offered by the banks to their customers. Similar to credit cards, these are borrowing limits that can be used any time.
Credit line transfers generally happen under the overdraft protection plan, which is basically a credit line itself. These protection plans are applied to the customer's checking account by linking it to their savings accounts. Let's take a deeper look at the process that involves credit line transfers.
The credit line transfers are made as a planned or unplanned transaction. There are different fees and charges that are applied by the banks on these transactions. Some of them being the annual interest and transaction fees that are considered to be unreasonably high by many customers. However, these fees and charges are legally authorized and banks are unlikely to revise them in the near future.
These transactions are the most profitable for the banks, controversially, they are a rip off for the customers. The worst part is many customers are not even aware of the real cost of using these facilities. You can find out this cost by calculating the APR for these transactions, that will show the real picture:
Annual percentage rates (APR) are the actual annual cost that you pay on your borrowings. This is expressed in a percentage, considering all the charges that are levied on the principal amount, including interest, fees or any other charges. Since credit line transfers are charged with a fixed amount of fee this can be calculated by using the following formula:
Let's try to understand it better with an example: Assume you have a checking account and a savings account with ABC bank and you are running a successful business that requires you to make payments and receive payments regularly. But just as a caution you have opted for a credit line in the form of overdraft limit on your checking account. It is also covered by an overdraft protection plan that transfers money from your savings account to your checking account just in case it reaches below zero.
Now, let's say that your account had a £1,000 balance, but it was hit by a cheque of £1,025, in this case the overdraft protection plan transferred an amount of £35 that brings your checking account balance above zero as well as covers the fee of £5.75. Now the total loan amount here would be considered as £30.75 (£25 to cover the overdraft + £5.75 fee), when put it into the above mentioned formula, you will find out that it will cost you 6825.2% in a day.
This happens because even if the amount was regularized the very same day, the bank's system will calculate its transaction charges for at least a day, irrespective of the transaction amount. Doesn't it seem unrealistic and unreasonable? Well, from now on you can calculate these charges in order to avoid paying the hefty price for small transactions, and you don't even have to go through the calculations manually, you may just use an online calculator such as the credit line transfer APR calculator designed by iCalculator to simplify these complex calculations. Let's explore how to use the calculator.
In order to get the desired results, just enter the following values into the calculator:
On the basis of above inputs made by you the calculator will provide you with the APR of your credit line transfer with just a click.
You may use the results obtained from the calculator in comparing the fees that are being charged by different banks, to find out if it is time to switch banks.
You may also use the calculator even if you do not have the facility yet, just by making inquiries about charges, and decide if it is in your favor to use the facility.
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