Additional charges

The normal charge associated with an overdraftis the interest cost that arises due to the usage of the credit facility. But apart from this charge there are other costs that a borrower may need to take care of. This is in the form of processing fee that is levied when the overdraft is actually sanctioned. This fee is to be paid once and is usually around 1% of overdraft limit. This way a bank seeks to recover the cost incurred by it in carrying out the entire processing of the facility from the borrower. In many cases, the bank even waives this cost or reduces it significantly, resulting into a savings for the borrower.