Module 8 · Borrowing and debt
Overdrafts, credit cards and buy now, pay later
How everyday credit works, why paying only the minimum on a card can take 15 years, and what changes for buy now, pay later in 2026.
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In this lesson
- Tell an overdraft, a charge card and a revolving credit card apart, and say when each charges interest
- Calculate why paying only the minimum keeps card debt alive for years
- Explain how buy now, pay later works, why plans add up, and the new rules in the EU and the UK
Klara, 23, owes €3,000 on her credit card. Each month the app shows a “minimum payment” of about €85, and she pays it on time. She feels responsible. But at this pace, she will still be paying in 15 years. How can that be?
Overdrafts: a short bridge
An lets your current account go below zero, up to a limit. Interest is charged every day on the negative balance. It is built for short gaps, such as a few days before payday, not for months.
Short use is cheap. €500 below zero for 30 days at 12% a year costs €500 × 0.12 × 30 ÷ 365 ≈ €4.93. A whole year below zero costs €60, often plus fees.
Two kinds of credit card
The word “credit card” covers two quite different products.
- A , common in Slovenia, collects your spending for a month and takes the full amount from your account on one day. If the money is there, you pay no interest.
- A revolving lets you carry part of the balance into next month. It is a form of : you borrow, repay and borrow again up to a limit. Interest on the unpaid part is often 15–25% a year. In mid-2026, US cards that charged interest averaged about 22%.
The minimum-payment trap
A is the smallest amount you must pay to avoid a late fee. It is designed to keep the account in good standing, not to clear the debt. Many minimums are set as a small share of the balance, so as the debt shrinks, the payment shrinks too.
If a payment is no bigger than the monthly interest, the balance never falls at all. €2,000 at 2% a month costs €40 a month in interest, so a €40 payment repays nothing.
Buy now, pay later
(BNPL) splits a purchase into a few instalments, often 3 or 4, usually through a separate finance company. Many plans charge 0% interest. The risks are different: it does not feel like debt, it is easy to have several plans at once, and missed payments bring late fees and debt collection.
Small plans add up. Four plans of €40 every two weeks are 4 × €40 × 2 = €320 a month.
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