Use credit facilities only for short-term bottlenecks

Berlin – At the end of the month, many account users like to use their credit facility to quickly get paid. The downside: It’s the most expensive money you can borrow. Because the interest rates are usually a lot higher than installment loans. So if you want to save money, should get a cheap installment loan, with which the account can be quickly compensated.


Image: Woman with shopping bags 

It is so easy. If the month is not over yet, the money but all, then you cover his account. After all, most financial institutions give their customers a discretionary credit. The advantage: you get money fast. The disadvantage: It is the most expensive money that you can borrow, because the interest rates are usually much higher than installment loans.

Use credit facilities only for short-term bottlenecks

“The disposition credit is only for short-term bottlenecks,” therefore finds Dirk Stein from the Federal Association of German banks in Berlin. “If you need money in the long term, you should arrange an installment loan.” Kerstin Backofen of the Stiftung Warentest also advises that the emergency loan be used only in an emergency and only for a short time. “One should always have in mind how much you pay for it.”

Interest on the credit line is 11.44 percent on average

And that is comparatively much, especially in the current low-interest phase. According to a survey conducted by the Stiftung Warentest in January 2012, the interest rates for a credit line for an average of 68 surveyed banks are 11.44 percent. With the direct banks and many PSD banks one comes away comparatively favorably with 6 to 8 per cent, for it takes some Volksbank or large bank also sometimes 14 per cent interest.

According to the banking association, the credit line has been in existence since 1970. Nevertheless, it still plays a subordinate role in terms of total lending volume. According to Bundesbank statistics, household loans totaled a good 140 billion euros by the end of 2011. Of this amount, however, only 13.5 billion euros on the credit line. Tendency falling. As recently as December 2004, the shortfall on the German current accounts was just under 20 billion euros.

The bank decides on the release and the amount of the credit line

Anyone who receives a credit line and in what amount, each bank decides for itself. “This depends on the payment behavior and the incoming payments,” says Dirk Stein from the Federal Association of German Banks. “Much is also a matter of negotiation,” says Kerstin Backofen.
“You have no claim to a credit line.” In most cases, banks grant an overdraft of two to two and a half times the income.

Accordingly, the disposition changes if the account holder suddenly earns nothing more or less. “If the circumstances change, for example, the account holder suddenly has a lower income, the disposition is also reduced,” said oven. The banks responded quickly, so that the Dispo not a debt trap. “I see this danger only when other credit lines are running.” Anyone who has not paid his credit card bills in full, but only monthly with the minimum amount and, in addition, bought a car on installments, could at some point find it tight if the account is constantly in negative territory.

A real debt trap does not look Claudia Kurzbuch of the Federal Working Group debt counseling in the credit line. With fluctuating income or a sudden issue such as an expensive repair the Dispo even makes quite reasonable. “However, if you have to use your disposition forever, we recommend rescheduling it.”

Prefer to look for a cheap installment loan

In such a case, it would be better to get a cheap installment loan, with which the account can be compensated again. It is important, however, that the amount of the disbursement credit granted is reduced as much as possible. “Otherwise, the debtor lives in a short time again from the Dispo and must also additionally pay installments for the loan,” says Kurzbuch.

A calculation example makes it clear how much more expensive a disposition credit is. If you cover your account with 2000 euros, this costs 264.80 euros at an interest rate of 13.24 percent per year. Who converts the minus into a installment loan at the same bank, pays interest at around 6 percent interest only 120 euros annually.

If he gets his installment loan from a cheap direct investment bank, he can reduce his interest payments even further. The banks are taking up to 5 percent more interest, even if the MRP is not enough. Anyone who needs money beyond their credit line in the checking account and claims a so-called tolerated overdraft facility will find it expensive.

Pay attention to account interest when changing accounts

Whose bank demands high disbursement interest, should look for alternatives. According to the independent financial advisory FMH in Frankfurt, there are numerous financial institutions that require less than 10 percent interest on a credit line. The offers range from
9.99 percent up to 5.50 percent. In addition to some regional providers, there are also larger institutions.