Calculate overdraft interest: How Sparkasse, Commerzbank and Co. calculate

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Banks grant their customers a certain amount of overdraft on their account – the overdraft facility – but in most cases they also charge fees. Comparisons show that the overdraft interest is currently between around four and almost 15 percent. Stiftung Warentest compared over 1,200 banks in 2020 and determined an average interest rate of 9.61 percent.

Noticeable: direct banks, i.e. providers without branches, tend to be more customer-friendly when calculating overdraft interest. Here, an average of only six to seven percent overdraft interest is due.

Contents of this article

Formula: Calculate overdraft interest

Unlike interest on loans, overdraft interest is calculated and updated on a daily basis. The reason for this is that the account balance on a current account often changes several times a day due to transfers and withdrawals. In order to be able to calculate the overdraft interest precisely, the following formula is used:

Overdraft facility used x interest rate x days / (days in the year x 100)

Calculating overdraft interest: example

An example illustrates what that means exactly:

Suppose you have overdrawn your checking account with 1,000 euros for 14 days. The overdraft rate is given as seven percent. Then the calculation is:

1000 x 7 x 14 / (365 x 100) = 98,000 / 36,500 = 2.68 euros

The 2.58 euros are due for the entire period of 14 days – calculated down to one day that would be 19 cents a day. How much the amount of the actual overdraft interest can differ becomes clear if the currently highest interest of (rounded) 15 percent is assumed in the example. Then you pay a total of 5.75 euros or 41 cents a day instead of 2.58 euros for two weeks.

How banks have to show the overdraft interest

Why are the overdraft rates so high anyway?

Offers from direct and branch banks compared

In comparison to the favorable overdraft rate

Favorable offers from various direct banks prove that these arguments and possible default risks do not necessarily have to lead to a high overdraft interest. When looking for a checking account, you should always compare different providers. Pay attention not only to the information on possible overdraft interest, but also to any additional fees. Some banks that offer a current account without overdraft interest charge monthly account maintenance fees instead.

Alternatives to the overdraft facility: banks are required

No matter how low the overdraft interest on your current account is: The overdraft facility is not suitable as a long-term solution or to finance a larger financial request. Not only are the interest rates disproportionately high, the credit line is also usually not in line with needs. In order to protect customers from permanently high interest rates and thus from over-indebtedness, banks are even legally obliged to inform you about alternatives under certain conditions. If you use 75 percent or more of the agreed overdraft facility over a period of six months, a consultation must take place.

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Beware of overdraft interest

Even if the overdraft facility is already intended as an emergency solution, it can sometimes happen that even this is overdrawn. Some banks then block the account, increase the overdraft facility or post the corresponding direct debit back. However, some providers also tolerate the overdraft and then charge the so-called overdraft interest. And that can get really expensive: Up to 20 percent of the overdraft is due here. Although such offers are becoming increasingly rare, many banks now charge the same interest for overdrafts and overdrafts – when comparing different offers, you should still pay attention to the information on how to deal with overdrafts. Or even better: not let it get that far financially.

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