2023-10-11 12:15:11
Sometimes there can be parallels between football and personal finance. At first you have no luck, and then you have bad luck. Rising prices are currently driving many people into this situation. Because if the expenses of everyday life are financially demanding, you are also exposed to ever higher interest rates for overdrafts.
Anyone who overdraws their current account currently pays an average of 11.9 percent interest. Some banks even charge more than 15 percent. This is shown by data from FMH Finanzberatung, which compared the conditions of 80 banks and savings banks. A year ago, the average interest rate for overdrafts was 9.5 percent. Especially on October 1st, many credit institutions increased significantly again.
Overdrafts are short-term loans that banks grant to their customers when they quickly need a little more money than they have in their checking account. The maximum credit limit usually depends, among other things, on the customer’s income and creditworthiness.
Usually two to three months’ salary
An overdraft amounting to two to three months’ salary is usually granted. Anyone who exceeds this limit or overdraws their account without being granted a predetermined overdraft facility will pay overdraft interest. These are even higher than overdraft interest – currently on average just over 13 percent. In any case, financial institutions usually charge significantly higher fees for their short-term financial injections than for regular loans.
The overdraft facility is likely to become relevant for more and more customers. In a survey by the Yougov opinion research institute, more than one in six of the more than 2,000 respondents said they could hardly afford their own living expenses due to high inflation rates. An overdraft is often the way out to pay urgent short-term expenses. However, it can quickly become a financial burden if overdraft facilities are continually used.
As a rule, the interest rates of overdraft facilities are linked to reference interest rates such as the key interest rate of the European Central Bank. If the Frankfurt monetary authorities increase their key interest rate, the overdraft interest rates will also go up with a slight delay. In July last year, the ECB first increased the key interest rate from 0 to 0.5 percent. Since then, the key interest rate has risen in ten steps to 4.5 percent.
The increase in overdraft interest only began months later at the end of last year. In July, when the ECB began raising key interest rates, the average overdraft interest rates even fell slightly again. On the one hand, this means that customers of overdraft facilities do not have to immediately feel the effects of rising key interest rates. On the other hand, the delayed development of overdraft interest rates is likely to lead to even higher overdraft interest rates in the near future. The most recent interest rate increase was less than a month ago.
Upper limit required
In the summer, the consumer protection ministers of the federal states spoke out in favor of an upper limit for overdraft interest rates and sent a corresponding test order to the federal government. The ministers consider an upper limit of 5 to 8 percent to be appropriate. The banks and savings banks see it completely differently. Their interest group, the German banking industry, pointed out to the German Press Agency the lively competition within the German banking market, from which consumers benefited. State intervention is therefore not necessary.
And in fact: the range between the interest rates for overdrafts is large. Anyone who overdraws their account frequently can benefit from comparatively low single-digit interest rates at GLS Bank, Targobank, DKB and ING, for example. According to Stiftung Warentest, overdraft interest rates of up to 10 percent are still cheap. She considers offers above 13 percent to be overpriced. This affects customers of Deutsche Bank, which charges 13.54 percent interest from overdrawn accounts.
Archibald Preuschat Published/Updated: , Recommendations: 9 Markus Frühauf Published/Updated: , Recommendations: 41 Christian Siedenbiedel Published/Updated: , Recommendations: 7
Regular overdraft users should therefore also note the bank’s conditions for overdrafting the account when opening an account. Some banks also offer interest-free overdrafts for smaller amounts, usually a few hundred euros. Stiftung Warentest also recommends debt restructuring with the help of an installment loan. On average, these cost about half as much as the overdraft facility.
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