Contact info National Bank of Serbia at the end of April of this year show that the average interest rate of the permitted minus in 17 commercial banks in Serbia is 17,49 percent, while the average price of an illegal overdraft on a current account in the same banks is 15,87 percent, writes Biznis.rs.
What is an unauthorized minus?
Unlike allowed minus, a banking product that the user has been authorized to use by the bank in which he has a current account, an illegal minus is a debit that occurs when money is spent from the account that the client does not have at all.
Most often, it arises from exceeding the limit of the contracted allowed minus, but also in some other cases in which a payment needs to be made, and there are no more funds in the client's account.
"Illegal deficit is not a product and the client cannot use funds that he does not have to pay for something. It most often happens that the bank charges for maintenance or takes off the loan installment, so the client thus 'goes into an illegal deficit' and the interest is prescribed by law, which is the same everywhere," a commercial bank told Biznis.rs.
Prescribed default interest by law amounts to the reference interest rate of the National Bank of Serbia plus eight percent, which is currently 13,75 percent.
Illogicality in the market
In addition to the use of bank funds for which there is no guarantee, an illegal minus usually means additional costs, so banks in this case also charge additional administrative fees for reminders or tracking outstanding debts, as well as for blocking cards.
When these costs are added together with the legal default interest, we get an average interest rate of almost 16 percent on the unauthorized use of bank funds in Serbia.
"It is obvious that the interest that includes all these costs is lower than what the banks charge for the allowed minus, i.e. the pre-approved loan with which they have agreed to use and for which they have security, which seems illogical to say the least," concludes Biznis.rs in the analysis.
Source: Biznis.rs
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