Overdraft Annual Cost Calculator

Bank overdrafts charge interest on the negative balance and sometimes layer on annual fees or daily-usage charges. The headline rates on arranged overdrafts can be high — often higher than mainstream credit-card APRs — and the daily compounding nature of overdraft interest means relatively small average balances accumulate meaningful annual cost when the overdraft is used most of the year. This calculator turns the four common cost inputs (balance, days used, APR, annual fees) into a single annual figure.

How to use it

Enter the average daily overdraft balance over the year (a rough mental average is fine), the number of days per year the account spends in overdraft, the overdraft APR shown in the account terms, and any annual account fees that apply. The calculator returns the total annual cost, the interest component, the fee component, and the days used and APR for context. The currency selector at the top of the calculator changes formatting throughout — the math itself is currency-neutral.

Worked example

Picture an account that averages 500 in overdraft for 200 days a year, at a 40% overdraft APR, with 50 in annual account fees (currency follows the selector). Interest = 500 × 40% × (200 ÷ 365) ≈ 109.59. Adding the 50 fee gives an annual cost of 159.59. Halving the days in overdraft to 100 (still a meaningful chunk of the year) drops the annual cost to about 104.79; doubling the average balance to 1,000 with all other inputs unchanged raises it to about 269.18.

How the math works

Annual interest cost = average balance × APR ÷ 100 × (days in overdraft ÷ 365). Annual cost = annual interest cost + annual fees. The model uses simple interest on the average balance — a reasonable proxy for accounts that compound daily, given that the cost is dominated by the headline rate and time exposure rather than the precise compounding frequency over the course of a year.

How overdraft pricing typically compares with other credit

Reported APR ranges vary by country, regulator, and provider. As an orientation seen across consumer-credit literature: arranged-overdraft APRs commonly run higher than mainstream credit-card APRs in many markets; unarranged or unauthorised overdraft fees and interest are typically higher again. Some packaged-current-account products include an interest-free overdraft buffer up to a small amount; specifics depend on the product. Personal-loan APRs for the same borrower's credit profile are often substantially lower, which is why financial-guidance bodies in several countries publish material on the cost trade-offs between credit types.

What this calculator doesn't capture

The model uses simple interest on a constant average balance and a flat day count. Real overdraft costs can include daily-usage fees on top of interest in some products, tiered rates that step up at higher balances, separate fees for going beyond an arranged limit (unarranged overdraft), and country-specific consumer-protection caps that limit total monthly cost in some jurisdictions. The figures are an estimate of the headline annual cost based on the four inputs entered; the bank's account terms are authoritative for any specific product.