Overdraft Fee APR Calculator
Turn a flat overdraft fee into an annual percentage rate and a yearly total, revealing how expensive a small negative balance really is.
How it works
Effective APR = fee ÷ amount overdrawn × 365 ÷ days × 100 · Yearly cost = fee × times per year
An overdraft fee is a flat charge for spending money you do not have for a short time, which makes it behave like an extraordinarily expensive short-term loan. Because the fee is fixed regardless of how little you overdraw or how quickly you repay, the annualised rate explodes when the amount is small and the shortfall is brief. A $35 fee to borrow $100 for a few days can annualise into the thousands of percent — dwarfing any credit card. The yearly total is the other half of the story: a handful of overdrafts a year quietly adds up to real money.
Worked example
A $35 fee to cover a $100 overdraft repaid in 5 days is 35 ÷ 100 × 365 ÷ 5 = 2,555% APR. The fee alone is 35% of the amount overdrawn. If it happens 6 times a year, that is $210 in fees annually.
Frequently asked questions
Why is the overdraft APR so astronomically high?
The fee is flat, not proportional. Borrowing $100 for five days and paying $35 is a 35% cost for less than a week — annualised, that is over 2,500%. The smaller the overdraft and the faster you repay, the higher the effective rate.
How can I avoid overdraft fees?
Opt out of overdraft coverage so transactions are declined instead of fee-charged, link a savings account for free transfer cover, or keep a small buffer. Many banks now offer fee-free small overdrafts or a grace period.
Is an overdraft fee interest?
Legally it is a fee, not interest, so it is not quoted as an APR. But converting it to an APR is the only way to compare it fairly with other borrowing — and it almost always loses that comparison badly.
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Educational estimate, not financial advice.