Overdraft facility in Germany
In Germany, overdraft facilities are called “Dispositionskredite” or “Kontoüberziehung.” An overdraft facility allows current account holders to withdraw more money from their account than they have available, up to a pre-approved credit limit. Here are some important points to understand about overdraft facilities in Germany:
Availability: Overdraft facilities are typically available to individuals who hold a checking or current account with a bank in Germany. The bank assesses the customer’s creditworthiness and determines the maximum credit limit they are eligible for.
Interest Charges: Overdraft facilities are subject to interest charges. The interest rate is typically higher than the rates for other types of loans, as overdrafts are considered short-term borrowing. The interest is usually calculated daily or monthly based on the amount of credit used.
Repayment: Overdraft facilities are generally designed to be revolving credit lines, allowing customers to use and repay the credit as needed. Account holders can make payments to reduce the negative balance, and as they do so, the available credit limit increases again. It’s important to note that interest charges continue to accrue until the overdraft is fully repaid.
Credit Limit: The credit limit for an overdraft facility is agreed upon between the bank and the account holder. It represents the maximum amount that can be withdrawn beyond the available balance in the account. The credit limit is based on factors such as the individual’s income, credit history, and relationship with the bank.
Fees: Some banks in Germany may charge fees associated with overdraft facilities, such as account maintenance fees or transaction fees. These fees can vary depending on the bank and the specific account terms.
Credit Assessment: Banks in Germany evaluate an individual’s creditworthiness before granting an overdraft facility. They may consider income, employment stability, credit history, and existing financial obligations.
Credit Limits and Changes: The credit limit for an overdraft facility is not fixed indefinitely. Banks periodically review the creditworthiness of their customers and may adjust the credit limit accordingly. Account holders who wish to increase or decrease their credit limit can contact their bank to discuss the options.
Using overdraft facilities responsibly and being aware of the associated costs is essential. While overdrafts can provide short-term financial flexibility, they should not be relied upon as a long-term solution due to the higher interest rates. Monitoring account balances and managing credit use is crucial to avoid accumulating excessive debt.
Several banks in Germany offer overdraft facilities to their customers. Here are some of the central banks that provide overdraft facilities:
Note: To have overdraft benefits, one must have an active account, i.e., a salary account in an intended bank.
- Deutsche Bank
- Commerzbank
- DKB (Deutsche Kreditbank)
- ING-DiBa
- Sparkasse (a network of savings banks)
- Volksbanken and Raiffeisenbanken (cooperative banks)
- Postbank
- Santander Consumer Bank
- HypoVereinsbank (UniCredit Bank)
- TARGOBANK
These banks typically provide overdraft facilities to customers with checking or current accounts, subject to creditworthiness assessments and approval. The terms, credit limits, and interest rates for overdraft facilities vary between banks and depend on the customer’s income, credit history, and relationship with the bank.
It’s advisable to contact the specific bank of interest directly or visit their website to obtain detailed information about their overdraft facility offerings, including terms, fees, interest rates, and the application process. Additionally, it’s essential to carefully consider the costs and use overdraft facilities responsibly to avoid accumulating excessive debt.
