Overdraft
Also known as: Dispo, Dispositionskredit, overdraft facility
An overdraft is the ability to spend more than you have in your checking account, going into negative balance. Sounds convenient — but it is one of the most expensive forms of credit. Overdraft interest rates typically run 10–15% per year.
How expensive is an overdraft really?
At €2,000 overdraft and 12% interest, you pay €240 per year in interest alone — without repaying a single cent. That is €20 per month that simply disappears. For comparison: a personal loan costs 4–6%, an ETF returns 7–8%. Living in overdraft means paying effectively 20% interest differential.
How do you get out of overdraft?
Step 1: Stop overdrawing — ask your bank to reduce the limit. Step 2: If possible, replace the overdraft with a cheaper personal loan (refinancing). Step 3: Plan a fixed amount in your budget for overdraft repayment. Step 4: Once at zero, build an emergency fund so you never fall back in.
BudgetHeld says
An overdraft is the opposite of an emergency fund. In BudgetHeld, you see immediately whether your income covers your expenses — if the reserve is negative, you are at overdraft risk. Goal: reserve to 0, then build your emergency fund.
Related tools
Budget Tool →Related Terms
Written by David El Dib — Financial expert & founder of MoneyTalk