Overdrawing your account

An overdraft happens when you spend more money than there is in your current account – your balance goes negative.

Two levels:

1. Arranged overdraft (Dispositionskredit):

• The bank grants you a credit line (often 2–3 months' net salary)
• Interest: 10–15% per year
• Example: €1,000 overdrawn at 13% = €130 interest/year = €10.83/month

2. Tolerated overdraft (EVEN worse!):

• When you overdraw by MORE than the arranged overdraft
• Interest: 15–20% – the most expensive everyday interest rates there are
• The bank CAN refuse (direct debits are returned → reminders!)

What you should do:

✅ Avoid the overdraft: keep a €500 buffer in your current account
✅ Use the overdraft: only in an absolute emergency, for a few days at most
✅ Permanently overdrawn? Refinance immediately with an instalment loan (5–7% instead of 13%)
✅ Lower your overdraft limit: ask your bank – it reduces the temptation