Being in the red is less popular

The average loan amount is decreasing and more and more Dutch people are choosing not to be in the red. This is a good development, because overdraft is bad for your own wallet. Even though it is an easy way to borrow money, it has a major disadvantage; it is very expensive.

Being in the red is not in demand
Being in the red is not in demand

Being in the red is the easiest way to borrow money , because you don't have to sign anything at all. You simply withdraw more money than there is in your account. Even though it is tempting for many people to make use of this, it is not done as quickly as before. More than 58 percent of Dutch people have not been in the red once this year. This has emerged from an investigation by Money Wise.

Longer term trend
Not being overdrawn is a longer-term trend. An earlier study conducted by the Authority for Consumers & Markets showed that between 2009 and 2013 fewer Dutch people opted to be in the red. In addition, the amount they borrowed on an overdraft account had dropped to US $ 1124. This is a decrease of 9 percent.

More expensive than a loan
Being overdrawn is more expensive than a personal loan or revolving credit . At most banks you pay between 8.4 and 14.1 percent in interest . Many banks also let the interest rate depend on the maximum amount that you can be overdrawn. Minister Dijsselbloem recently indicated that consumers should realize that borrowing money really does come at a price. Dijsselbloem said this in response to an announcement by the OLN Bank not to charge interest for customers who are overdrawn for the first three days. According to him, overdrafting on a bank account should not be free. This sends the wrong signal to consumers.

Being in the red only becomes a real problem when this occurs all year round. If you only do it sporadically, because your salary has not yet been received and you have to pay your mortgage, then there is not much going on. You only pay a high amount for overdraft if you do this all year round. The amount you have to pay per day is much lower. You will therefore not immediately become poor from being in the red for a few days.

Loan is more beneficial
If you suddenly have to make an expensive expense, for which you do not have enough money, it is wiser to take out a personal loan or revolving credit. The interest on a personal loan or revolving credit is a lot lower than the interest on overdrafts.

Published on October 15, 2014 at 1:36 pm by the editors .

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