Many Dutch people can be red at the bank. Good Finance is also called a credit on a checking account. You must request this option from your bank.
It can be useful to be sure that you can always withdraw more money. Having extra money in hand gives a form of certainty. That way you can always pay unexpected extra costs. For example, an expensive bill that you had not foreseen or getting groceries when your wages are transferred too late.
Everything about credit on checking account
Some banks also refer to a credit on a payment account as a ‘current account credit’. Standing in red is nothing but the ability to withdraw extra money that you don’t have. This is only possible with a checking account with a so-called credit facility. Both companies and individuals can use this.
Conditions credit on payment account
What are the conditions that you must meet to be in the red? Not everyone can be in the red. Banks use pretty strict conditions that you must meet before you can apply for a credit on a checking account. With most banks you have to be positive at least once every 3 months, ie have a positive bank balance. The level of income is also important.
Not possible with payment
People on benefits can therefore not apply in red. But not even if you earn too little. Remember that red stock is still a form of credit. Just like borrowing money, you will also have to meet certain requirements with a red balance. You can also not apply for credit on a current account if you are younger than 21. Using a current account credit can go pretty well. Banks almost always charge the maximum allowed interest on the loan amount.
How much can you be in the minus?
Dutch banks always link the possibility of being red at the bank to a checking account. Withdrawing extra money is only possible from your own account. The amount you can take out extra varies per bank.
For some, you can have a maximum of 500 euros in red while you can withdraw 1000 euros or more at other banks. Do you want to be able to be 2,500 euros or more in red? Then it is wise to apply for a small revolving credit. That makes you cheaper.
High interest rates is a disadvantage
The disadvantage of being in the red is that you spend a lot of money on the high interest that banks charge on the amount that you withdraw. You never know in advance how much this will cost you, since the interest is flexible / variable. Practice shows that interest rates always go up over time.
This makes it difficult to compare interest rates at different banks. Being in the minus for a few days does not cost you much money. This only changes when you are in the minus for several consecutive months or even years. Are you often and for a long time red? Then try to convert your current account into a revolving credit. You are so much less expensive.
Save instead of borrowing
Try to save in times when you have money left. Don’t spend the money, but save it for worse times. Saving nowadays hardly yields any more money, but it is a nice thought that you always have some money to cover sudden costs.
Do not apply for a credit on a checking account because you want to go on holiday if necessary or to finance other nonsense expenses. You may work yourself into trouble with that. Experience shows that it is very difficult to undo the red position. People often continue to use this extra credit for years.