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Overdraft interest made simple for Expats in Germany

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A third of all Germans take out an overdraft facility, ten percent even several times a year. Overdrafts are expensive, although the banks can currently refinance themselves with the European Central Bank at historically low interest rates. Find out what to look out for when choosing your overdraft facility and understanding the overdraft interest.

An overdraft facility is set up in a certain amount (“overdraft facility”) on a current account (“current account”). Usually, overdrafting limits of two or three (sometimes five) net monthly salaries are granted. The account holder can dispose of up to the disposition credit line for the purposes of payment transactions, for example by bank transfer or cash withdrawal. Overdraft interest is due as soon as the customer actually makes use of the overdraft.

Overdraft interest

The granting of an overdraft facility requires a separate agreement. As long as there is no such overdraft facility agreement between the bank and the current account holder, the current account must be kept in credit. The overdraft facility comes into being legally when the customer makes a claim, with which he accepts the loan offer from the bank, which the bank submits by sending an unsolicited letter to the customer or by referring to an overdraft facility in the account statement.

As a rule, no collateral is required for the granting of an overdraft facility. The bank only checks from time to time whether an overdraft facility is still justified by the ongoing incoming payments. The repayment of an overdraft facility can take place through incoming payments of different magnitudes.

Difference between overdraft facility and overdraft

Overdraft facilityOverdraft
Always availableYesNo
Amount of interestapprox. 7 to 15% per yearapprox. 12 to 20% per year
ClaimThe bank customer is entitled to the previously agreed overdraft facility. What this is used for is up to him.No bank customer is entitled to an overdraft. It can be approved or rejected by the bank. So it is a tolerated loan.
Loan amountThe banks determine individually with the customer how high the overdraft facility should be. The usual amount is three times the net income of the bank customer.Since there is no entitlement to an overdraft, it is difficult to say something about the amount of the overdraft.
However, the amount depends on salary and creditworthiness.
RepaymentUsually there are no fixed monthly payments that have to be paid. However, you should make sure that you stay within the framework of the overdraft facility. Otherwise, overdraft interest may apply.The overdraft must usually be repaid immediately. Otherwise the bank will terminate the current account.
Overdraft interest

How to calculate the overdraft interest

Many bank customers are rightly angry about high overdraft and even higher overdraft interest rates. But usually only a few euros per month are collected if the customer does not overdraw the current account.

Often times, consumers only take out this loan for a few days at a time, often towards the end of the month when they run out of money. The loan will then be repaid with the next salary payment.

Formula for calculating the overdraft interest

Amount of overdraftamountnumber of dayscalculationfees
10 percent500 euro15 days500 x 10 x 15 / 36,5002.05 euros

It looks different if you carry around a base of overdrafts with you month after month. Anyone who overdraws their account with an average of EUR 2,500 throughout the year pays EUR 250 at an interest rate of ten percent.

In this case it is certainly worthwhile to  redeem this amount with a significantly cheaper installment loan or a cheaper external overdraft facility from a bank, which is often referred to as a credit line or call credit.

Regional banks (savings banks, VR and private) with the highest overdraft and overdraft interest, sorted by overdraft

InstituteOverdraft facilityOverdraft
Volksbank Raiffeisenbank Oberbayern Südost Bad Reichenhall13,75016,750
Raiffeisenbank Plankstetten13,75018,750
Raiffeisenbank Anger13,25018,250
Gabler Saliter Bank13,25015.750
Union Bank13,00018,000
Rosbacher Raiffeisenbank13,00018,000
Volksbank Dreieich12,90017,900
VR-Bank Landsberg-Ammersee12,86017,860
Raiffeisenbank Moormerland12,75012,750
Oberbank12,75017.750
Raiffeisenbank Gilching12,75012,750
Raiffeisenbank Pfaffenhofen ad Glonn12,75018,750
Raiffeisenbank Aitrang-Ruderatshofen12,75017.750
Raiffeisenbank Küps-Mitwitz-Stockheim12,75017.750
Raiffeisenbank Ried12,70017,700
Volksbank Heimbach12,68017,680
Raiffeisenbank Struvenhütten12,55015.050
Raiffeisenbank Waldaschaff-Heigenbrücken12,50012,500
Raiffeisenbank Wallgau-Krün12,50017,500
Raiffeisenbank Oberaudorf12,50018,000

Overdraft and overdraft interest of the national banks

InstituteOverdraft facilityOverdraft
Postbank10.5514.95
Targobank12.4315.43
Hypovereinsbank10.6310.63
Deutsche Bank10.9014.90
Degussa9.6314.23
GLS Bank *0.000.00
Commerzbank8.7511.25
Santander8.058.05
average8.8711.18
* from 10,000 euros 7.0 percent.
Overdraft interest

Disposal and overdraft interest from direct banks

InstituteOverdraft facilityOverdraft
German Skatbank4.0804.080
Augsburger Aktienbank4,8007,800
comdirect bank6,50011,000
Triodos Bank6.5806.580
ING6,9906,990
1822 directly7.1707.170
DKB Deutsche Kreditbank7.3407.340
Edekabank7.340nv
Ethics bank7,50012,250
consorsbank7.7507.750
Netbank8,00013,000
MLP Bank8,50011,500
Fidor bank8,5008,500
N268,9008,990
Audi Bank8.998,990
Volkswagen Bank10.8513,250
Norisbank13,75016,750
average7.8558,938

This is how much you save with a low overdraft facility

If you regularly overdraw your checking account and your bank demands an overdraft interest of more than ten percent, you should switch to another checking account. 

The advantage: banks and savings banks are legally obliged to relieve you of almost all of the relocation work. The new bank notifies all payment partners of the changed account details and at the same time terminates the old current account. Everything is usually done in 14 days. In some cases, direct banks even offer fully automated account switching.

Inexpensive alternative to overdraft interest

Anyone who constantly overdraws their current account should think about an alternative so as not to pay too much interest to the bank.

This has the following advantages:

  • An installment loan is much cheaper than an overdraft facility.
  • With the installment loan, there are fixed monthly amounts that you repay.
  • With cheap providers, you can repay this loan in whole or in part without paying any fees.

TIP: Convert the average amount of your overdraft into an installment loan.

Overdraft interest

At what interest rate should I change banks?

Whether you as a customer should still accept a comparatively high overdraft rate from your house bank depends on various factors:

  • What are the total costs for the account (taking into account other factors such as account management fees and credit interest)?
  • Would you like personal advice from your local bank or is an inexpensive direct bank account sufficient for you?
  • Does your personal credit rating allow you to switch to another institute without further ado?

Overdraft interest is not the only criterion!

When choosing a current account, do not only pay attention to the overdraft interest – account management and card fees, costs for cash withdrawals and the interest on credit should also be included in the overall assessment. Before you switch to another bank because of high overdrafts, you should first check the options for low-interest consumer or call-off loans.

Wht to always remember about overdraft interest: Avoid debt!

Better than taking out a loan at a cheap interest rate is avoiding debt.

  • Debt often develops when there is no overview of the financial situation. A comparison of income and expenditure helps to determine the liquidity situation. If this is known, measures to increase income and / or reduce expenditure can be initiated at an early stage.
  • Carefully review all expenses to see if they are necessary.
  • Reserves built up early on help bridge financially stressful emergencies, so that taking out expensive loans can often be avoided.
  • Entitlements to state benefits should be fully asserted (for example, housing benefits and other social benefits)
  • Before taking out a loan, you should compare the terms and conditions of different banks.
  • Debt counseling centers help with payment difficulties.
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Expaturm aims to help educate Expats in Germany on key issues that they will have to deal with while living in Germany by providing everything you need to know about Banking, Healthcare, Lifestyle, and Housing in Germany
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