Interest on business and private accounts
Anyone who speaks of interest for current or business accounts should first clearly differentiate between debit and credit interest. Debit interest is incurred for a overdraft or overdraft credit, credit interest is granted for a credit on the account. As with private accounts, there are also considerable differences from bank to bank for company accounts. While debit interest on loans is a significant factor and plays a role in choosing a provider, credit interest should not be the decisive factor.
What types of interest are there?
In principle, debit interest and credit interest must be distinguished. The bank charges debit interest as a fee if the account holder overdraws his account. In the case of a private account, this is referred to as a overdraft facility. If the credit line granted is overdrawn, this is an overdraft facility. Both the overdraft and the overdraft credit are expensive financings, the debit interest varies strongly from bank to bank. Due to the amount of the borrowing interest, a overdraft facility and an overdraft facility should never be exhausted permanently or in full. The situation is similar with the working capital loan, which corresponds to the overdraft facility for a business account. The establishment of a working capital loan by the bank requires the account holder to have an impeccable credit rating. Above all, before approving the loan, you must submit a credit report and proof of your last income. In this way, the bank checks your creditworthiness before setting up the credit line for your company account.
Interest on credit balances must be distinguished from interest on debit balances. They are generally granted if there is a credit balance on your current account. Due to the European Central Bank’s ongoing policy of low interest rates, most banks no longer offer credit interest on private accounts. This is not always the case with commercial banks. If you value interest on the credit balance on your company account, you should check the conditions of the banks carefully and also keep an eye on the other conditions such as costs for account management, for the credit card or for the working capital loan.
What is the difference in interest on business accounts?
Interest can be paid on a company account balance. In this case, the bank will pay interest on the balance you have in your business account. These interest rates are low given the low key interest rates of the European Central Bank and can almost be neglected in comparison. On average, they range between 0.01 percent and 0.05 percent. Interest is paid on credit balances from the first euro. Payment is usually made every quarter, but also at the end of the half-year or only once a year at the end of the year.
In addition there is credit interest, if the current account is coupled to an overnight money account. To do this, you must transfer your credit balance on the business account to the call money account. The online banking that most banks offer for a business account means that this can be done quickly. You can, for example, transfer the available balance to the call account at the end of the month and then receive an interest credit month after month, per quarter or at the end of the year. Many banks keep the credit interest on the call money account variable and adjust it according to the key interest rate. It is also possible that the interest is only granted for a certain period of several months or that the interest rate is staggered depending on the amount of the credit. The more credits you have accumulated, the lower the interest rates on the credits will often be.
There is another variant of the credit interest rate for money that is saved on the credit card. This interest corresponds approximately to the credit interest for the overnight money account. Not all banks offer this alternative, so you should take a close look at the conditions. For many account holders it is more practical to save credit on the call money account, because it is available there at any time. Straight ones for reserves, which are meant for the bridging of liquidity bottlenecks, are well suitable the daily money account despite its very small interest. It is comfortable, safe, usually free of charge and the money can be called up at any time.
Frequency of interest payment on business accounts
As a rule, interest is credited per year. The interest is usually paid out at the end of the year in the first days of the following year. Some banks offer monthly or quarterly payments. The more often interest is paid out, the stronger the compound interest effect. It means that the interest paid continues to bear interest. In principle, this is of course a desirable effect, so that a monthly interest payment is the best option. In practice the frequency of the interest payment is less
Which banks still offer credit interest?
The banks set the interest rates for a current account or an overnight money account depending on the key interest rate of the European Central Bank. This has been zero since the beginning of 2016. This means that a bank itself does not receive interest on deposits with the ECB. As a result, it also grants its investors only very low interest rates for a credit balance in a call money account or a current account. This explains why there are currently so few banks that offer credit interest on a private or business account and why the interest rate on overnight money is so low.
If you are nevertheless interested in an interest rate on the credit balance and if all other conditions are right, you can of course choose a provider with a low interest rate for credit balances. The banks change their interest rates occasionally, so it’s worth comparing conditions. In addition to the fees and the interest for the credit line, you should also consider the interest on the credit balance.
Santander Bank offers interest on some accounts. Also the Ziraat bank from Turkey chooses a small interest for its combination account, whereby it concerns here a combination of a Giro and an overnight money account. It is important to know that the bank is based in Turkey. The supply with cash is secured Germany far over foreign banks, for it however fees result.
Also the ING makes a business account with daily money account available for new customers. The interest is fixed for a certain period, afterwards a reduced market interest takes effect. In addition, it only applies up to a fixed amount. In the case of larger investment amounts, a reduced interest rate applies again.
Advanzia Bank also offers a very good interest rate for a minimum investment of EUR 5,000, which in turn is limited in time. Other banks that you can consider in the comparison are Consorsbank and Renault BankDirekt. If you are interested in one of the major banks in Germany, it is worth taking a look at the conditions offered by Hypovereinsbank. The WillkommensKonto Business, for example, offers interest that is graduated by amount. The amount of interest depends on the amount of the balance. For business customers whose account has an average balance of between 30,000 and 75,000 euros, the interest rates are quite attractive. You should also keep an eye on the Berliner Bank, where there are quite interesting interest rates, as long as your balance on the account is not higher than 30,000 euros.
Conclusion: Credit interest does not play a role in the account comparison
Since the interest rates for credit balances at most banks have been at a low level for some years both for business accounts and for private accounts, this criterion plays at best a subordinate role in the account comparison. The situation is different for interest rates on loans. These interest rates represent the costs that you have to pay for a working capital loan. Here the conditions of the banks vary enormously, so that you should pay the necessary attention to this aspect with the account comparison.