Non-cash bank accounts are expensive for customers.

There are times when the money in the bank account is not enough to cover expenses. Unexpected household chores or car repairs, health issues that require urgent response or even salaries that are not paid on time can force a family to spend more than they have in the bank. The account enters the red zone and the customer must be prepared for what happens. Bank overdrafts – a facility usually associated with payroll accounts – have high costs and may not even be the best solution for emergencies.

The Bank of Portugal has set, for this third quarter of the year, a maximum loan interest rate per annum of 19.2% for cases where the client uses overdraft facilities but also obtains liquidity via credit card. Most banks in Portugal charge lower fees, although they are quite high. The debtor must also take into account that the credit used pays stamp duty and that salary accounts are subject to monthly commissions.

An example is the analysis provided by ComparaJá, a platform for comparing financial products and services. Once the salary is domiciled and the overdraft facility agreement is signed, BPI allows the use of up to 100% of the net salary value (i.e. salary advance). In this case, the annual interest rate is 16.59%. For sole proprietorship/self-employed/professional retirees, the rate is 18.55%. The credit used in the form of an authorized overdraft is repaid monthly, for the amount due (principal and interest) on the day the salary is deposited.

Simply put: the client has an expense of 500 euros, but only 200 euros are left from the salary. To pay this bill, you will have a negative balance of 300 euros, using the overdraft facility contracted with the bank. When the next month's salary or any other amount decreases, the banking institution will automatically remove the 300 euros due, plus the interest involved

CGD has a similar policy to BPI, which also requires the conclusion of an overdraft facility credit agreement so that the holder can access funds in excess of the account balance. At Caixa, overdraft facilities are limited to the average salary/income residing in current deposit accounts over the past six months. Interest is charged on the amount of each use, from the date that this amount is debited to the account until the day the amount is redeemed. At CGD, the interest rate is agreed on a case-by-case basis between the two parties.

Therefore, we must conclude that using overdraft facilities is expensive and can leave the customer burdened with debt. One solution to deal with a temporary lack of liquidity may be a credit card, which has a (variable) period during which the amount of the debt is not subject to interest. There is also the possibility of obtaining personal credit, where the maximum interest rate is 15.8% during this quarter.