Overdraft

An overdraft is a situation in which a checking account, savings account or savings book has a balance less than zero, negative. The customer has spent more money than they had in that account and owes that money to the bank. This situation is also often called overdraft or red numbers, due to the color in which negative balances are conventionally printed.

The bank provides a loan, even for a few days, to cover the overdraft. This situation is usually quite expensive in relation to the amount and duration of the debt with the bank. The commissions that the bank usually receives are for these concepts:

• A percentage of the negative balance, due to the fact that it has passed from positive to negative balance and regardless of the time it lasts.
• An annual interest like that of any credit, which usually in this case is quite high.
• A minimum commission, independent of the amount of the debt.

Although red numbers are relatively expensive, they can never exceed 2.5 times the legal interest.

To avoid red numbers you can:

• Negotiate with the bank that the monthly charge of the credit card is applied on a date after the payroll fee.
• Ask the bank not to allow to make purchases with credit card superior to what is available in the card account.
• Manage with the bank a line of overdrafts for current accounts

However, not all accounts allow the balance to turn negative.