Credit line

A credit line (Kreditrahmen) is the maximum amount a bank makes available to you as short-term credit – without you having to apply each time.

Types of credit line (Germany):

1. Arranged overdraft (Dispo):

• Granted automatically if your salary is paid in regularly
• Typical: 2–3 months' net salary
• Interest: 10–14% (one of the most expensive loans!)
• Flexible: use and repay at any time
• No fixed repayment plan = debt trap!

2. Revolving credit facility (Rahmenkredit):

• Has to be applied for separately
• Credit line: typically €2,500–25,000
• Interest: 6–9% (much cheaper than an overdraft!)
• Monthly minimum repayment (often 2% of the amount drawn)
• Ideal as an alternative to an overdraft

3. Credit card limit:

• Typical: €500–5,000
• Partial repayment: 15–20% interest (extremely expensive!)
• Best: always pay the full amount by the due date

How the credit line is determined:

• Regular salary payments
• Schufa score
• Existing loans and obligations
• Length of the customer relationship

Tip: if you use your overdraft regularly, apply for a revolving credit facility instead – the same flexibility, but 4–6% less interest. Or even better: build up an emergency fund and need neither.