What is Overdraft?
Overdraft is a credit limit that the bank makes available on your checking account. When your balance goes negative, you automatically use the overdraft — and pay very high interest rates for it.
Why is it so dangerous
- Interest rates of 8% to 15% per month (150%+ per year)
- It is activated automatically (you don’t even notice)
- Interest is charged daily on the negative balance
- Many people use it without realizing they are paying
Practical example
If you are R$ 1,000 overdrawn for 30 days with interest rates of 12% per month:
- Interest: R$ 120
- In 6 months without paying: R$ 1,000 becomes R$ 1,973
- In 12 months: R$ 1,000 becomes R$ 3,896
How to avoid?
- Disable the overdraft — call the bank and ask to remove it
- Keep a reserve in the account — at least R$ 500 as a cushion
- Set up alerts — warning when the balance is low
- If you need credit — a personal loan has interest rates 5 times lower
Cheaper alternatives
| Type of credit | Monthly interest |
|---|---|
| Overdraft | 8-15% |
| Credit card (revolving) | 12-16% |
| Personal loan | 2-5% |
| Payroll loan | 1-2% |
| FGTS anticipation | 1-2% |