How to Get Out of Overdraft and Credit Card Revolving Debt

Why is overdraft and revolving credit so dangerous?

You opened your bank app, looked at your balance and realized you’re in the red — again. Or else your credit card statement arrived, you paid just the minimum, and now the debt seems to have a life of its own: it grows every month, even without you spending anything else. If this situation sounds familiar, know that you are not alone. Millions of Brazilians live with overdraft and credit card revolving debt as if they were a normal part of their budget. They are not. They are two of the most expensive lines of credit available to individual consumers in Brazil.

The central problem with these modalities is the speed at which interest accumulates. Unlike a personal loan with fixed installments, overdraft and credit card revolving debt charge interest on interest continuously — a mechanism called compound interest, which works in favor of the lender and against the debtor. A debt that seems small today can double in size within a few months, depending on the rate applied by the bank.

This article is not about financial miracles. It is about strategy, priority and concrete steps that anyone can follow to escape these credit traps, breathe more easily and, gradually, regain financial balance.

Know the enemy: how overdraft and revolving debt work

Before tackling any problem, you need to understand it.

Overdraft

The overdraft is a pre-approved credit line that the bank automatically makes available to you, associated with your checking account. When your balance goes to zero and you continue making transactions, the bank “lends” that money automatically — and immediately begins charging interest.

In Brazil, the Central Bank has imposed an interest rate cap for overdrafts: since 2020, the monthly rate cannot exceed 8% per month for the first 30 days of use. Check the updated regulations directly on the Central Bank of Brazil website (bcb.gov.br), as rules may be adjusted over time. Even with the cap, 8% per month compounded is devastating: it represents more than 150% per year in terms of Total Effective Cost (CET).

Credit card revolving debt

The revolving debt comes into play when you pay only the minimum amount (or any amount less than the total) of your credit card bill. The remaining balance is “rolled over” to the next month with extremely high interest charges.

Since 2017, an important rule exists: the consumer can only stay on revolving debt for a single billing cycle. After that, the bank is required to offer bill installment payment, usually at lower rates than the revolving debt — but still high compared to other credit modalities. Check your card’s conditions and the rules currently in effect at the Central Bank to understand the details of your contract.

Diagnosis: map your debt clearly

The first step to get out of the hole is to know exactly how big it is. There is no point in acting on impulse without the information in hand.

1. List all debts in overdraft and revolving, noting: bank, current outstanding balance, interest rate charged (it’s on your statement or contract) and installment amounts, if any.
2. Sum the total you owe in these modalities.
3. Compare with your net monthly income — how much comes into your account every month, already deducted for taxes and contributions.
4. Identify the source of the problem: did the debt arise from a one-time emergency, from a recurring expense above income, or from a habit of supplementing your salary with credit?

This diagnosis is essential because the exit strategy changes depending on the cause. A one-time debt has a different solution than a structural imbalance between income and expenses.

Strategy 1: trade expensive debt for cheaper debt

This technique is called credit portability or refinancing, and is one of the most effective ways to reduce the immediate financial cost of debt.

The logic is simple: you pay off the overdraft or revolving debt using a line of credit with lower interest, and begin paying this new debt under more manageable conditions. Options that usually have lower rates include:

• Personal loan (check the rates at your bank and other institutions — credit portability is a consumer right guaranteed by the Central Bank)
• Payroll-deductible loan (if you are a civil servant, retiree, or employee of a partnered company) — usually has the lowest rates in the personal credit market, since the discount is direct from your paycheck
• Secured loan (property or vehicle), which tends to have intermediate rates, but involves the risk of losing the asset in case of default
• Direct negotiation with the bank for debt installment under special conditions

Pay attention to CET (Total Effective Cost): when comparing options, don’t just look at the nominal interest rate. The CET includes fees, mandatory insurance, and other charges, and is the real number you need to compare between options. By law, the bank is required to inform the CET before contracting.

Strategy 2: cut access and attack the balance

While you are paying interest on a debt, continuing to use the credit that generates that debt is like trying to empty a bucket with a hole in the bottom.

1. Request the bank to reduce or cancel your overdraft limit. Most institutions allow this via the app or customer service. This eliminates temptation and the risk of falling back into the trap.
2. Reduce your credit card limit to the amount you can pay in full every month — or cancel cards that are not essential.
3. Set a fixed monthly amount to pay toward the debt, always above the minimum. Even an extra R$ 50 or R$ 100 per month makes a significant difference in how fast the debt is paid off, thanks to the effect of compound interest working in reverse.
4. Automate the payment: set up automatic debit for the amount you defined. This prevents oversights and delays, which can generate fines and worsen the situation.

Strategy 3: increase income — even if temporarily

Sometimes reorganizing the existing budget is not enough. If the margin for cuts is small, increasing income is part of the solution.

One-time extra income can greatly accelerate debt payoff. Some possible paths:

• Selling items you no longer use (clothes, electronics, furniture)
• Freelance services in your field of work
• Side income activities compatible with your routine

For an honest analysis of whether it’s worth seeking extra income and how to evaluate available options, check out the article Is it worth earning extra money in your spare time? here on the blog.

The important point: extra income, if earned, should be directed entirely toward the debt during this period — and not absorbed by new spending.

Strategy 4: negotiate with your creditor

Many Brazilians are afraid to call the bank and negotiate. But banks have an interest in receiving the debt and frequently offer special conditions to those who take the initiative to get in touch.

• Ask for a payment plan with interest reduction
• Ask if there are renegotiation programs in place (such as Desenrola Brasil or equivalent initiatives — check if there are active programs at the time you are reading this article)
• Always negotiate in writing or keep your service records
• Don’t accept the first offer without comparing it to other credit options available in the market

How to avoid returning to overdraft and revolving debt

Paying off the debt is only half the battle. The other half is not falling back into it. Some habits that protect your budget in the long run:

• Build an emergency fund: personal finance experts usually recommend between 3 and 6 months of essential expenses saved in high-liquidity investments. This is the fund that prevents an unexpected expense from throwing you back into overdraft.
• Use credit card as a tool, not as an income extension: spend only what you already have in your account, and pay the bill in full every month.
• Monitor your budget monthly: free apps exist that sync with your bank account and help you track where your money is going.
• Plan large purchases in advance: instead of installments on your card or using overdraft, schedule the purchase, save the amount monthly, and pay cash or under realistic payment conditions.

To better understand how to organize money left over after paying off your debts, the article Fixed or variable income: how to choose the best option can be a good starting point — always remembering that all investments involve risks and market conditions change.

Conclusion: getting out of the red is possible — with strategy and consistency

There is no magic solution for overdraft or revolving credit debt. What exists is a concrete path: understanding the problem, calculating the size of the debt, trading expensive credit for cheaper credit when possible, cutting off access to the lines that create the problem, and building habits that prevent relapse.

The process may take months — depending on the size of the debt and your financial flexibility. But every month in which you pay above the minimum and do not deepen the outstanding balance is a real step in the right direction. Financially, getting out of the red is not a matter of luck: it is a matter of priority and method.

Start today. Open your statement, write down the numbers, and take the first step.

> Educational note: This article is exclusively educational and informative in character. It does not constitute a recommendation for investment, financial product, or personalized advice. Rates, rules, and conditions mentioned may vary and change over time — always consult official sources (Central Bank of Brazil, financial institutions) and, for important financial decisions, seek guidance from a professional registered with the CVM or authorized by the Central Bank.