Many citizens with limited financial resources turn to borrowing by accessing overdrafts or using credit cards. While this form of borrowing is generally less advantageous, it can be beneficial in certain situations, particularly during emergencies when immediate funds are needed.
However, some people use overdrafts and credit cards not out of necessity but for various other reasons.
Miroslav Marinković, owner and director of “Econoversum,” explains to Danas that credit borrowing should be driven by a genuine need. “Viewed through this lens, using an overdraft or credit card limit can sometimes be beneficial, providing greater value compared to the interest costs,” he says.
Marinković provides an example:
“Imagine you’ve been tracking the price of an item and have saved up for it. If a significant discount becomes available but you lack the cash, using a credit card to make the purchase, despite the high interest cost, might still be advantageous due to the discount,” he explains. Regarding overdrafts, he notes, “Paying utility bills at the beginning of the month with an overdraft might save you five to ten percent compared to waiting for your salary. Thus, the high interest rate might not seem as daunting.”
However, Marinković points out that many citizens do not use these financial products rationally. “Often, people use these loans due to urgent needs rather than planned borrowing. The immediate solution offered seems sufficient, with little thought given to long-term consequences. Banks capitalize on this and quickly establish contractual relationships,” he explains.
Marinković also notes that banks have streamlined and expedited the borrowing process with cash loans. “Caution and planning are crucial. By focusing on good planning, citizens can optimize their loan usage,” he advises. He suggests that both the public and regulators should push for greater transparency in loan margin structures and highlight the additional benefits banks gain from customer data.
“When you become a new bank client, the bank collects extensive data about you, such as your income and spending behavior. This data helps the bank reduce marketing costs and target campaigns more effectively. Consequently, clients should expect lower interest rates or fees in exchange for providing this data. Banks benefit significantly from the data they collect, so it’s reasonable to expect them to offer better terms,” Marinković explains.
In conclusion, Marinković emphasizes that banks sell money but also acquire valuable data. “If this data helps banks improve their business outcomes with lower costs, it makes sense for the products they sell to be cheaper. Banks are aware of this and offer more favorable loans to new clients to gain valuable data,” he adds.
