Bank overdraft, a very bad idea!

Never underestimate an overdraft situation! What seems trivial at first can gradually turn into a downward spiral. Take the example of Sarah and Thomas, a young couple whose financial management faltered due to a few unexpected expenses, an initial overdraft, and several poor decisions. Their story illustrates how crucial it is to keep an eye on your balance to preserve your financial health and future.*

Do you think a small exceptional overdraft is not a major problem? That’s true. But if it happens too often and you don’t pay attention, the consequences can gradually take a very unpleasant turn. Let’s imagine the case of Sarah and Thomas, a young couple who have just moved in together. At first, everything seems ideal in terms of their relationship and budget: a comfortable apartment, future plans, and reasonable management of their finances. However, a few months after moving in, they begin to encounter financial difficulties which, if poorly managed, drag them into a downward spiral towards over-indebtedness.

A first overdraft… then others

It always starts with a first small mishap. In this case, Sarah and Thomas decide to celebrate their first wedding anniversary with a dinner at a fancy restaurant. The evening is perfect. When it is time to pay, they use their credit card. Having forgotten to check the balance of their joint account, this leads them to exceed their authorized overdraft limit. The bank charges them a penalty fee, and they receive a text message informing them of their negative balance to be regularized as soon as possible. They are not thrilled with the news, but it is not a disaster. They regularize their situation the following month and, instead of learning from this incident, life goes on as if it never happened.

These accumulating fees not only restrict your budget but also undermine your ability to save or invest in future projects.

Over the months, the situation repeats itself. Sarah and Thomas get into the habit of spending more than they earn, thinking they can always „catch up” the balance with the next paycheck. They know that each overspending comes with additional fees, but they are starting to get used to the situation. They fully intend to address it one day, but that day is always tomorrow. What they don’t really realize is that these accumulating fees not only restrict their budget but also undermine their ability to save or invest in future projects.

An impact on the credit rating

When buying a new car, our couple intends to turn to credit. They do not have the means to finance a new vehicle with their own funds anyway. Thomas contacts their joint bank and, to their great surprise, their request is refused. Their banker explains that their credit score, in other words the quality of their borrowing profile, has been affected by their frequent overdrafts and late payments. The bank does not support them! This refusal poses a problem for them because they need a car to get around, and their current vehicle is showing signs of wear. They will have to anticipate potentially significant repair costs, and this is really not the right time.

The credit score is affected by frequent overdrafts and late payments.

Little by little, their financial situation becomes a source of constant stress. Sarah and Thomas start arguing about money, each feeling that it is the other’s responsibility to make efforts to stop the bleeding. Their evenings, once joyful, turn into tense discussions about their expenses. This stress affects their relationship and overall well-being, adding extra pressure to their daily lives. A vacation for the two would be nice, but it is simply not feasible given their financial situation.

An impact on the banking relationship

Due to their history of overdrafts and following their credit refusal, Sarah and Thomas would be well advised to request a meeting with their bank advisor to discuss their situation. Feeling uncomfortable and fearing judgment, they instead avoid any contact with their bank, thus depriving themselves of valuable advice. By choosing the strategy of pushing forward, they further worsen their situation to the point where they can no longer manage on their own. But where can they find help?

The choice of revolving credit

With their damaged credit rating at their bank, Sarah and Thomas decide to apply for a revolving credit from a little-known company on the other side of the Belgian border. This goes smoothly, and they benefit from a quick availability of the funds they immediately need to pay their debts. But when doing their calculations, they realize a little too late that their medium-term situation has further deteriorated. The interest rate on their loan is significantly higher than what they would have obtained for a traditional loan. Of course, this further increases their monthly financial burden.

The risk of over-indebtedness

Ultimately, the combination of all these factors leads them into a spiral of over-indebtedness. They find temporary solutions, such as loans from friends or credit consolidations that allow for more extended repayment periods, but under even less favorable conditions. Their situation is sinking from all sides. They end up being so indebted that they must consider extreme solutions, such as personal bankruptcy.

Unfortunately, their marriage did not survive all these trials. Sarah filed for divorce. Now it is necessary to carefully examine the consequences of the matrimonial regime under which they were married, as it has significant repercussions on the distribution of their assets and the debt they have accumulated. The story of Sarah and Thomas illustrates how overdrafts, initially perceived as isolated incidents, can trigger a spiral of financial problems, affecting their mental health, their relationship, and their future. If it is too late for them, there is still time for you to become aware of the importance of rigorous financial management to avoid such drifts.

The worst over-indebtedness situations often start with a few small slip-ups that initially seem harmless. Never let this happen to you; take control of your budget and get support from experts. myLIFE also offers you a special folder on “budget” to help you. Take advantage of it, it’s free!

* Content translated from French by the BIL GPT AI tool