Overdraft facility is definitely the credit that is used by many consumers, without considering that it is a credit that the bank grants here.
Almost all banks grant customers who have a checking account in-house an overdraft facility, the amount of which usually corresponds to two or often three net monthly salaries. Married couples who have a checking account together and both work, may get a overdraft facility of 20,000 USD, which they sometimes do not even have to apply for. This is the credit line within which dispositions can be made, even if the current account is not covered.
Cost of the overdraft facility
The management and provision of the dispos are always free of charge. A disposition only incurs costs if it is used. For this, the banks charge differently high interest rates, which, depending on where the account is managed, can be between 6.90 percent and 15.00 percent.
Many consumers then consider the overdraft facility as a second income and sometimes even finance their daily living from the overdraft facility. A short time later, they often no longer manage to balance their overdraft facility with wages. The current account will then only be kept in the debit at some point, making it really expensive, even if it is actually a free current account. Interest is usually charged on a quarterly basis and adds up accordingly to the balance.
Consumers consciously or unconsciously use the most expensive loan that can be taken out. They get into the dispo trap, from which they often simply cannot get out of the way. If there is then an unauthorized overdraft on the credit line, the bank is entitled to terminate the overdraft facility and make it due at short notice.
Replace the disposition loan with an installment loan
The overdraft facility is not intended for consumers to make a living from it. It is also not intended to be used to finance purchases such as televisions, washing machines or the like. The overdraft facility is a flexible loan that can be used to compensate for short-term liquidity bottlenecks, for example when a car repair has to be paid or the holiday trip has to be paid in advance. As a consumer, you should be able to return the overdraft facility used within three months, so that the checking account is then kept in credit.
However, if you no longer come out of the “red” numbers, it makes sense alternatively to take out a cheap installment loan, which can then be used to redeem the overdraft facility. This can save the high interest charges.
The call credit as an alternative to the overdraft facility
The call credit is not so well known among consumers and is only offered by a few German banks. It can be an alternative to overdraft facility because it is also a flexible loan that is repaid variably. On the one hand, call credits are not tied to the management of the current account and, on the other hand, they are significantly cheaper in terms of costs because the interest rates are significantly lower when drawn.