How is interest on an overdraft calculated?

G

Gerryf2323

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Hi I got an overdraft recently on my account but I get it hard to understand the fees if someone could help

It says interest is charged yearly at 11% but is that going to be 11% of everything I use from it over the course of a year or just 11% of the overdraft limit?
 
In very rough terms...

It will be 11% per year of the amount you borrow.

It is recalculated every day. The daily interest rate is 11%/365 or about 3 cents per €100 (if I have my decimal points in the right place.)

So if you run up an overdraft tonight of €1,000 , you will be charged 30 cents interest tonight.
If you clear it tomorrow, you won't be charged any interest tomorrow.

So the right strategy is to keep your actual negative balance in the bank as low as possible.

If you have a facility of €10,000 and don't actually use it you won't be charged interest. You may be charged an annual facility fee. For example, I think AIB charges me €25 a year.

Brendan
 
Last edited:
Brendan Burgess said:
In very rough terms...

It will be 11% per year of the amount you borrow.

It is recalculated every day. The daily interest rate is 11%/365 or about 3 cents per €100 (if I have my decimal points in the right place.)

So if you run up an overdraft tonight of €1,000 , you will be charged 30 cents interest tonight.
If you clear it tomorrow, you won't be charged any interest tomorrow.

So the right strategy is to keep your actual negative balance in the bank as low as possible.

If you have a facility of €10,000 and don't actually use it you won't be charged interest. You may be charged an annual facility fee. For example, I think AIB charges me €25 a year.

Brendan
Click to expand...
Thank you for the reply
So if I have an overdraft of €1000 and used it fully 6 months out of 12 I'm not going get a charge from the bank and the end of the year for 11% of the €6000 I've used over the year
 
is it cheaper to use a credit card as an overdraft? Once you clear the balance at each bill.
 
Yes, it's cheaper not to pay interest than to pay interest if you use your card for purchases.

However, if you use your card for cash withdrawals, it's much more expensive than 11% p.a.

Brendan
 
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