In short: A low-fee current account, an emergency fund in instant-access savings and an avoided overdraft are widely seen as a solid baseline — the overdraft averages around 11% a year (often 10–14%), making it one of the most expensive everyday debts.
Accounts, cards & overdraft done right
Kontoo editorial team · Updated 07/04/2026 · last reviewed 07/04/2026 · 6 min read
Your accounts are the foundation of your finances. Tidying them up and avoiding a costly overdraft often saves more than many a savings plan.
Check your current account: what does it cost per year, and does the plan still fit?
Move an emergency fund to a separate instant-access savings account — available any time, kept apart from daily spending.
Avoid or clear the overdraft: a running negative balance averages around 11% a year (often 10–14%), pricier than most other debt.
Close old, unused accounts and cards — fewer accounts mean fewer fees and a clearer view.
What matters
A common mistake is letting the overdraft creep in like a second income: first €200 in the red, then a permanent €800 — and interest keeps ticking every single day. At 12% a year, staying €1,000 overdrawn costs around €120 a year for nothing in return. People also often overlook that going beyond the agreed overdraft is charged at an even higher rate — around 13% a year on average. A second blind spot is credit cards with revolving balances: it feels convenient but is effectively an ongoing loan at steep interest. And account fees add up — €8 a month is nearly €100 a year for something some providers offer free. A clear separation helps: a current account for daily life, savings for your buffer, and the overdraft at zero wherever you can.
Staying in the red is expensive: overdrafts average around 11% a year (often 10–14%), tolerated overdrafts around 13%, and credit-card revolving credit often runs to 15% and more.
ExampleStaying €1,000 overdrawn all year at about 11% a year costs roughly €110 in interest — money that vanishes with nothing to show for it (overdraft rate varies by bank, 2026).
Stuck permanently in the red? Here is an overview of possible routes out: getting out of debt.
The overdraft rate (around 11 % per year, as of 2026, and markedly higher at some banks) is only the first tier. Going beyond your agreed limit pushes you into tolerated overdrawing, for which many banks charge an extra rate that often sits a few points higher still. A common intermediate mistake is treating a permanently used overdraft as „normal“: a steady 2,000 € in the red costs about 220 € a year at 11 %, effectively a quiet salary cut. It is usually smarter to actively pay off a long-running overdraft – for example with a plain installment loan at a markedly lower effective rate and a fixed repayment schedule. When comparing, look at the effective rate rather than the nominal one, because only the effective rate captures all the costs.
Debit card, credit card, fine print
Debit and credit cards feel identical at the till but behave differently. The classic German girocard is widely accepted domestically yet often weak online and abroad – there a Visa/Mastercard debit or a true credit card helps. Watch three items that are easily overlooked: the foreign transaction fee (frequently around 1.5–2 % per non-euro purchase), flat ATM withdrawal charges, and with „real“ credit cards whether the full balance is debited at month-end or only a partial amount. That partial or revolving repayment option is a hidden interest trap, often in the range of 15 % or more. When withdrawing cash abroad, always pay in the local currency and decline the offered „instant conversion“ (DCC), because its exchange rate is usually worse.
Account structure and seizure protection
At the next level the question is less which single account to pick and more how to slice several wisely. A proven pattern is two to three accounts: a checking account for day-to-day flows, an instant-access savings account for the emergency fund (so it is not „accidentally“ spent), and – often sensible for couples – a joint account for shared fixed costs. Worth knowing: a joint account set up as an „or account“ lets each holder act alone with full access, which can get delicate in a dispute or separation. A special case with real protective value is the German P-Konto (seizure-protection account): any checking account can be converted into one for free, shielding a monthly basic allowance (from 1 July 2026 around 1,590 € for a single person, raisable with a certificate) from creditor seizure. This is not a crisis taboo but a legally provided tool worth knowing before you need it.
Avoid a costly overdraft and switch banks
An overdraft is among the most expensive everyday debt. In Germany the rate is often around 11 percent per year, depending on the bank. Bridging a short gap can be fine, but as a permanent state it is costly: if you sit in the red month after month, it is worth actively clearing the overdraft. Usually that works via a classic installment loan with a markedly lower rate and a fixed repayment plan – you swap an open, expensive minus for a predictable monthly payment and put the running deficit behind you in an orderly way. Switching accounts is just as underrated. Trading a current account with high fees for a cheaper – often free – one is easier than many assume. In Germany the Payment Accounts Act even legally obliges banks to help with the switch: the account-switching service moves your standing orders and direct debits to the new account and notifies your payment partners. A good habit is to briefly compare account fees once a year – if your plan stays pricey, switching today takes little effort.
Checklist
Know and compare your account's annual cost
Emergency fund in a separate instant-access account
Bring the overdraft to zero or refinance it
Cancel unused accounts and cards
Common myths
Myth: The overdraft is basically free as long as I don't max it out.
Reality: Every euro in the red costs interest from day one — on average around 11% a year (often 10–14%), usually well above a normal instalment loan.
Myth: A credit card automatically means debt.
Reality: Only if the bill is not paid in full. Settle the full amount each month and it is simply a payment tool with no interest.
Education, not advice. How we work and check figures: Editorial. Figures as of 2026, last reviewed 07/04/2026.
Frequently asked questions
What is the difference between a debit and a credit card?
A debit card usually takes the money straight from your account. A credit card collects your spending and bills it later, usually monthly — and if it is not paid in full, high interest kicks in.
Is the overdraft not handy for emergencies?
Bridging a short gap can make sense, but as a permanent state it is expensive. For real emergencies an instant-access emergency fund is generally the calmer and cheaper option.
All lessons · Glossary · Editorial · Kontoo does the math and explains – this is general education, not tax, legal or financial advice.
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