Calculate the total cost of an overdraft from interest on the overdrawn balance, a flat daily fee, or per-transaction charges, so you know what going overdrawn really costs.
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Overdraft Cost Formula
The cost of an overdraft depends on how your bank charges. Use the formula that matches your account.
When the bank charges interest on the overdrawn balance:
OC = A * (R / 100) * (D / 365)
When the bank charges a flat daily fee:
OC = F * D
When the bank charges a fee for each transaction made while overdrawn:
OC = T * N
Where:
OC is the total overdraft cost ($). A is the overdrawn amount ($). R is the annual interest rate or EAR (%). D is the number of days you stay overdrawn. F is the flat fee charged for each day overdrawn ($). T is the fee charged per transaction ($). N is the number of transactions made while overdrawn.
The interest method spreads the charge across the days you are overdrawn, so paying the balance back sooner lowers the cost. The daily method applies a fixed charge for every day with a negative balance, regardless of size. The per transaction method applies a set fee each time a payment is made from an overdrawn account. If your bank combines methods, add any one off flat fees on top using the additional fees field.
Typical Overdraft Charges by Method
The figures below are common ranges to help you sense check an entry. Your own bank's fee schedule is the only accurate source.
| Charge method | Typical range | How it adds up |
|---|---|---|
| Interest / EAR | 15% to 40% EAR | Grows with balance and days |
| Flat daily fee | $0.50 to $5 per day | Grows with days only |
| Per transaction fee | $10 to $35 each | Grows with number of items |
Example Problems
Example 1. You are overdrawn by $1,200 on an account with a 39.9% EAR and you stay overdrawn for 21 days. Using the interest method, OC = 1200 * (39.9 / 100) * (21 / 365) = 1200 * 0.399 * 0.05753 = $27.55.
Example 2. Your bank charges a flat $35 fee for each transaction made while overdrawn, and 3 transactions cleared before you topped up the account. Using the per transaction method, OC = 35 * 3 = $105.00.
FAQ
Is an overdraft fee the same as overdraft interest? No. A fee is a fixed charge applied per item or per day, while interest is a percentage charged on the amount you are overdrawn for the time you owe it. Some accounts use only one method and some combine both, which is why this calculator lets you pick the method and add flat fees separately.
How can I lower the cost of an overdraft? On an interest based account, paying the balance down faster reduces the number of days the rate is applied, which lowers the cost. On fee based accounts, reducing the number of overdrawn days or transactions is what cuts the charge.
What interest rate should I enter? Use the EAR or annual overdraft rate listed on your account terms or statement. If your statement only shows a monthly or daily rate, convert it to an annual figure before entering it so the days calculation is accurate.