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?

  1. Disable the overdraft — call the bank and ask to remove it
  2. Keep a reserve in the account — at least R$ 500 as a cushion
  3. Set up alerts — warning when the balance is low
  4. If you need credit — a personal loan has interest rates 5 times lower

Cheaper alternatives

Type of creditMonthly interest
Overdraft8-15%
Credit card (revolving)12-16%
Personal loan2-5%
Payroll loan1-2%
FGTS anticipation1-2%