The interest on call credits is variable. Depending on the market situation, banks can adjust, both lower and raise, at any time.
Easy to use
The credit line – the amount is determined on the basis of creditworthiness – is granted indefinitely. Withdrawals are possible at any time within this defined credit line. The desired amount must first be transferred to the checking account before it can be freely used. It is up to each customer whether the full credit line is used up or only in partial amounts.
Free provision – interest only when available
There are no costs for the provision of the call credit, and the account management is free of charge. In contrast to conventional loans, interest is only calculated when amounts are actually called and interest is only paid on the amount at disposal, not the credit line itself.
Call credit very similar to the overdraft facility
In principle, the call credit is a disposition loan, but not as a direct credit line on the checking account but as a separate credit line with your own credit account – an external credit line if you like. This means that the on-demand credit does not necessarily have to be requested from the bank where the own account is also held.
Framework credit – cheap alternative to overdraft facility
Except for the intermediate step that the amount to be transferred must first be transferred to the checking account, there are no major differences in terms of handling between overdraft facility and call-off credit – however, with the price structure. The average loan interest rate for the current account overdraft facility is currently (06/2013) around 11.00 percent, the interest rate for call credits are already significantly cheaper, as you can see in the table above.
Monthly interest costs in an exemplary comparison
|loan amount||Dispo (11.00 pa)||Call credit (7.00% pa)||Additional costs for disposition|
|$ 2,500||$ 22.92||14.58 USD||8.34 USD|
|$ 5,000||45.83 USD||USD 29.17||16.66 USD|
|$7,500||USD 64.75||USD 43.75||21.00 USD|
|10,000 USD||USD 91.67||58.33 USD||33.34 USD|
The numbers in the table are only a simple example, but the savings potential is clear. How much can be saved depends, of course, on the interest rate for call credit and overdraft. In general, rescheduling of the overdraft facility makes sense.
On-demand credit requires discipline
A credit line that can be used and repaid flexibly is of course very tempting. However, borrowers need to be aware that this flexibility also comes at a price – loan interest. Therefore, the credit line should really only be seen as a cash reserve and not used for expensive purchases, here a loan with fixed monthly repayment is the better alternative. In addition, a call credit should not be applied for in addition to an overdrafted current account if this is not balanced at the same time. The risk of over-indebtedness is simply too great.