What is a reserve of money. How it works?
A reserve of money is a maximum amount that you define with the lender and to which you can claim as you wish according to your needs. The money is made available to you and you can use it whenever you need it, without proof and very quickly because it is available immediately. Each time an amount is repaid, it becomes available to be borrowed again without any other action. This type of credit allows you to cope with the unexpected or to anticipate the income you need immediately.
1) How is the interest calculated and when must it be paid?
The interest only applies to the amounts withdrawn and therefore as long as you do not touch the capital made available to you, it costs you nothing. When you withdraw money from your reserve, you pay it back at your own pace, you are the master on board. However, most banks require that you repay a minimum percentage of the overdraft monthly.
Finally some banks, where your money reserve is coupled to a current account, will only record interest when you are negative on your current account. Others will authorize you to “joker” that is to say that they offer you the possibility of not making a refund one or two months per year.
2) Why a reserve of money? When to use it?
You do not have to provide any justification for using your money reserve. You are free to use the amounts withdrawn as you see fit. The reserve is however intended for small expenses and is moreover often capped at a few thousand euros. In practice, it will be used for purchases or to deal with a temporary difficulty such as paying invoices or for any other need falling within its usage limit.
3) The criteria for comparing the market offers
Apart from the APRC criterion on overdrafts which has the most impact on the cost of this product, we understand that banks will position themselves differently according to the following axes:
- Minimum amount and MAXIMUM amount. Often the Maximum amount is relatively limited by the nature of the credit. In general the banks allow maximum +/- 5000 $ as reserve amount but some banks allow to go up to much higher amounts.
- Minimum reimbursement to be made monthly. This amount often corresponds to a percentage of the amount that is overdraft, but some banks offer other methods of calculating this amount to be reimbursed.
4) How to use the money available?
To access the money at your disposal, you have a card similar to a credit card directly linked to your financial reserve. If no card is granted to you, you will have to make transfers to your bank account.
Note : We also invite you to consult our guide which explains the differences but also the similarities between the money reserve and the classic personal loan.
Synonyms: revolving, revolving, rapid credit or line of credit opening.
The money reserve often has other titles. Let’s review these other names while explaining why they are used. This will explain these uses of vocabulary:
- Revolving credit. By its very nature, as soon as the money reserve is repaid the amount initially allocated becomes available again and therefore the fact of repaying makes it possible to make amounts available, this is called a credit that is renewed.
- Credit revolving. It’s just the English name of the previous denomination
- Fast credit. Given that the money is available at all times and that you can use it as you wish without justification and without delay, it is difficult to do faster? which explains this denomination.
- Opening (of line) of credit. In fact the reserve of money makes it possible to draw amounts according to the needs what amounts thus to saying that a line of credit is opened