According to an evaluation by Barkow Consulting GmbH, the average overdraft interest has risen by 2.4 percentage points in one year.
This increase, which began with the interest rate hike by the European Central Bank (ECB) in October 2022, led to an average interest rate of 9.56 percent in March 2023.
However, some banks continue to offer relatively low overdraft rates, so switching banks should be considered to avoid high interest rates. An example calculation shows when a change could be worthwhile.
An analysis by Barkow Consulting GmbH for Business Insider shows that overdraft interest has risen by 2.4 percentage points within a year. The development of the Dispozinsen in recent months has had a significant impact on bank customers, who often have to resort to overdraft facilities for short-term financial bottlenecks to bridge.
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If you look at the period since 2012, it is noticeable that the overdraft interest in Germany has shown a steady downward trend after an average high of 10.39 percent in January 2012. This trend continued over the years and caused the average overdraft rate to fall to an all-time low of 7.0 percent in April 2022.
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However, this trend reversed in October 2022 with the initiation of the interest rate turnaround by the European Central Bank (ECB) vice versa. The overdraft interest has risen sharply since then and reached an average of 9.56 percent in March 2023.
Strongest increase in the last 20 years
This increase is the strongest increase in overdraft interest that has occurred in the past 20 years. The overdraft interest could soon be higher than it was ten years ago. Further rate hikes by the ECB are possible.
But why are interest rates rising so quickly at the moment? The interest rate turnaround by the ECB took place in quick steps and for banks, business with your deposits is becoming profitable again. That’s why interest rates go up Daily and Fixed Deposits also very fast. At the same time, however, it becomes unprofitable to lend you the money. So that the overdraft business continues to be worthwhile for the banks, the overdraft interest is also rising at a rapid pace.
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“It’s common for banks to pass on interest rate increases on loans faster than on deposits such as call money,” explains Peter Barkow, Managing Director of Barkow Consulting. But for the banks there would also be guidelines that would explain the current rate hikes. “After the change in the law in 2010, the overdraft interest of the Banks linked to a suitable reference interest rate. If this rises as is currently the case, the overdraft interest will increase almost automatically. Of course, the banks can also waive the increase,” he told Business Insider.
When is the change worth it?
Also means: There are still banks that offer relatively low interest rates. The recent development of overdraft interest shows that you should think carefully about which bank you go to. It is advisable to regularly check interest rates and conditions and, if necessary, to consider switching banks to avoid high interest rates.
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This sample calculation shows how much you save when you switch banks: If you have 1500 euros in the overdraft facility for a year, you pay a bank with 7.0 percent overdraft interest fees of 114 euros. On the other hand, if you are at a bank with 11 percent, you already pay 167 euros. Many savings banks even charge overdraft interest of over 13 percent. With an overdraft interest of 13.5 percent, the fees even climb to 205 euros. The change brings you a saving of 90 euros. But note the account management fees and conditions of the banks.
In addition, should bank customers keep in mind that an overdraft facility, despite its flexibility and convenience, is an expensive form of loan financing. Other credit options, such as an installment loan, can often be cheaper, especially if you need longer-term financing.