Be careful when overdrawing from your account: Overdraft interest rates are very high – 10.07 percent on average

Be careful when overdrawing from your account: Overdraft interest rates are very high - 10.07 percent on average

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Overdraft interest too high

If you are feeling a bit tight, you often overdraw from your account and use the overdraft facility to remove the bottleneck. Which is usually not a good idea. Especially in times of rising interest rates. Because the average interest rate for banks and savings banks is 10.07 percent.

Although the general level of interest rates is rising, but still comparatively low, the average overdraft rate of banks and savings banks for private customers is 10.07 per cent. According to an assessment by the financial comparison portal “Bialow”, 264 out of 1167 financial institutions have recently hiked interest rates, as reported by “Sudetsche Zeitung”. The average interest rate now stands at 10.07 per cent, up from 9.99 per cent a year ago.

As per “Bialo” valuation, the interest for overdrafting of overdraft facility is now 12.39 per cent from 12.29 per cent a year ago. “You have to remember that the average rate was already very high and unreasonable given the low interest rates,” said the portal’s founder Horst Biallo. The fact that banks are raising interest rates even more is “a strong point”.

Consumer advocates expect many to face financial difficulties as a result. “Especially in the current situation with exorbitantly rising prices, even high interest rates are very problematic,” says Andrea Heyer from the Consumer Center in Saxony. She believes that more and more bank customers will soon be forced to resort to overdraft facilities.

Dispos is usually the most expensive loan

Despite this, debtors should be aware that the overdraft facility for a checking account is usually the bank’s most expensive loan. You should only use it exceptionally and for a short period of time.

For many years, Stiftung Warrentest has observed that many banks offer special premium accounts and extras such as gold credit cards or insurance with very low overdraft interest. However, the account management fees here are so high that even customers who regularly use the overdraft facility have to pay more than a standard account with a significantly higher overdraft interest rate per year.

To give consumers an opportunity to better understand the offers of banks to compare, financial institutions are obliged by law from 2016 to clearly present the current interest rates on their website. For nearly 12 years, customers have been able to understand how and when the interest burden changes.

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(This article was first published on Tuesday, October 25, 2022.)

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