What this calculator does
Takes overdraft amount, arranged overdraft EAR (or daily fee), and number of days used. Returns total cost of the overdraft in interest or fees, and compares it to the equivalent APR for context.
The formula
Interest-based overdraft (post-FCA 2020 rules — most UK banks):
Daily rate = EAR to daily:
daily_rate = (1 + EAR)^(1/365) − 1
Daily interest = overdraft_amount × daily_rate
Total cost = daily_interest × days_used
Fee-based overdraft (some accounts still use daily/monthly fees):
Total cost = daily_fee × days_used
Equivalent APR from daily fee (for comparison):
APR = ((1 + daily_fee / overdraft_amount)^365 − 1) × 100
Assumptions
- Overdraft balance is constant throughout the period — no partial repayments are modelled.
- Interest is compounded daily using the stated EAR.
- Unarranged overdraft charges are not modelled (these are typically flat daily fees capped under FCA rules).
Data sources
FCA PS19/16 (2019) — Overdraft pricing rules: banks must charge simple interest expressed as an EAR rather than fixed fees, effective April 2020. Typical arranged overdraft rates range from 19.9% to 40% EAR depending on the bank.
Limitations
- Does not model unarranged overdraft fees, which are typically capped at around £5–8 per day under FCA rules.
- Does not model accounts with monthly subscription fees that include a free overdraft buffer.
- Actual daily compounding method may vary slightly between banks.
Worked example
Inputs: £500 overdraft, 39.9% EAR, 14 days.
Daily rate = (1 + 0.399)^(1/365) − 1 = 0.08944% = 0.0008944 Daily interest = £500 × 0.0008944 = £0.447 Total cost = £0.447 × 14 = £6.26
Changelog
| Date | Change |
|---|---|
| May 2026 | Initial publication |