Status: 11/21/2022 11:08 am
The turnaround in interest rates initiated by the ECB is now reaching current accounts. If you overdraw your account, you often have to expect significantly higher overdraft interest. Many consumers could come under additional pressure.
According to a study by the magazine “Finanztest”, the interest rate for overdrafting current accounts has recently increased significantly. As part of a sample, the interest rate in May averaged 9.25 percent, as financial test expert Heike Nicodemus said. With 99 account models, it was no higher than eight percent at the time. By mid-November, however, the interest rate had risen to an average of 9.89 percent.
“If credit institutions are currently increasing their overdraft interest rates, they will do so immediately. The momentum has increased since May,” says the financial expert. Only 69 models from a total of almost 440 had no more than eight percent. In the most expensive case, it was 13.92 percent. “Everything up to eight percent is still comparatively cheap from our point of view,” says Nicodemus.
Rapid increase in overdraft interest
If you have a checking account, you can usually overdraw it up to a specified amount. If consumers make use of the loan, in most cases they have to pay interest. The interest rate is linked to a reference interest rate such as the three-month Euribor. The Euribor rises with a time lag when interest rates rise, Nicodemus reported. “Banks don’t have to implement the increase, but they can. We found that on average, banks raise interest rates relatively quickly.”
Rising overdraft interest can put consumers under additional pressure in times of high inflation rates. “I suspect that given the rising inflation, some consumers will slip into the overdraft facility more quickly than in the past,” said Nicodemus.
More people with payment problems
According to data from the consumer portal Biallo, the overdraft interest rates have also risen. Under certain circumstances, it can become even more expensive if the granted overdraft facility is exceeded. According to the portal, in this case, according to data from almost 1,200 evaluated financial institutions, overdraft interest of 12.39 percent was due on average, in October 2021 it was 12.29 percent.
According to an investigation by the credit agency Schufa at the beginning of October, 24 percent of the 1,000 consumers surveyed have overdrawn their accounts in the past six months. A quarter delayed paying bills – up to the payment deadline or even beyond. From August to October, the number of people with so-called payment problems increased by 20 percent compared to the previous year. Schufa board member Ole Schröder spoke of a worrying development.
Discussion about interest rate cap
According to consumer advocates, excessive overdraft interest has long been a major annoyance for consumers. “The demand for a cap has been raised many times, but never seriously taken up,” said Dorothea Mohn, head of the financial market team at the Federal Association of Consumer Organizations (vzbv).
In addition to the amount of interest, everything should be done to ensure that the overdraft facility is used correctly, i.e. as a short-term bridging of temporary liquidity bottlenecks. “Banks must be held accountable to ensure that the overdraft facility does not become an overindebtedness trap,” demanded Mohn.