Overdraft Cost Calculator

Calculate the true cost of your overdraft. Most UK banks charge 39.9% EAR since FCA reforms in 2020. See the daily interest charge and how it adds up over a month or year.

Last updated: April 2026

Your overdraft details
Most UK banks charge 39.9% EAR since FCA reforms in 2020. Check your banking app.
Overdraft cost
Total interest charge
-
-
Daily interest charge -
Monthly cost (30 days) -
Annual cost if sustained -

How overdraft interest is calculated

Since FCA reforms in April 2020, all UK banks must charge a single annual interest rate (EAR) on overdrafts with no daily or monthly fees. This made overdraft costs more transparent and directly comparable. Most major UK banks settled on 39.9% EAR - Barclays, HSBC, Lloyds, NatWest, and Santander all charge this rate. Some challenger banks and building societies charge lower rates.

Interest accrues daily. The daily rate is the EAR divided by 365. On a £500 overdraft at 39.9% EAR, the daily charge is approximately 55p. Over 30 days that is around £16.50. It sounds modest, but if you are permanently overdrawn it compounds quickly.

Is an overdraft more expensive than a credit card?

At 39.9% EAR, a current account overdraft is significantly more expensive than most credit cards (20–30% APR). If you regularly use your overdraft, it is almost always cheaper to transfer the balance to a credit card - ideally a 0% purchase card - and pay it down from there. A personal loan at 5–15% APR is also considerably cheaper for sustained borrowing.

Buffer accounts and alternatives

Some banks offer a small interest-free overdraft buffer (typically £15–£50) before interest begins. Check whether your account has one. If you regularly go overdrawn at the end of the month, automating a small transfer from a savings pot a few days before payday can eliminate the need for the overdraft entirely.

Frequently asked questions

Following the FCA's overdraft reform in 2020, which banned fixed daily fees and required a single simple interest rate, most major banks independently settled on 39.9% EAR. This rate was chosen to maintain overdraft revenue at similar levels to the old fee-based model while complying with the new rules. The FCA has indicated it will review outcomes of the reform to assess whether competition is working effectively.
Using an arranged overdraft within your agreed limit does not directly harm your credit score. However, regularly using a high proportion of your overdraft limit can be a negative signal to some lenders, as it suggests financial stress. Exceeding your overdraft limit or having an unarranged overdraft will be reported and can negatively affect your credit file. Paying the overdraft off each month keeps it from becoming a long-term liability.
EAR (Equivalent Annual Rate) assumes interest is compounded and reflects the true annual cost of the overdraft. APR (Annual Percentage Rate) includes fees and charges in addition to interest. For overdrafts, most lenders now quote EAR following FCA rules. For personal loans and credit cards, APR is the standard comparison metric. When comparing an overdraft to a credit card or loan, use EAR for the overdraft and APR for the alternative - they are broadly comparable.

Related calculators

Credit Card RepaymentDebt & Credit Debt-to-Income RatioDebt & Credit Savings Goal CalculatorSavings & Investment Take-Home Pay CalculatorWages & Tax