How Overdraft Interest Works
Overdraft protection and personal lines of credit charge interest only on the amount you actually use. Interest accrues daily at a rate derived from your APR.
- Daily interest = Balance × APR ÷ 365
- Total interest = Daily interest × Days used
- Monthly estimate = Balance × APR ÷ 12
Overdraft APRs can range from 10% to over 30%. Repaying quickly minimizes interest charges. If you need funds longer term, consider a personal loan with a lower fixed rate.
Frequently Asked Questions
Can I reduce my overdraft interest rate?
Yes — you can ask your bank to lower your rate, especially if your credit score has improved. Refinancing into a personal loan at a lower APR is another option for larger balances.
Does using my overdraft hurt my credit score?
Overdraft usage itself doesn't directly lower your credit score, but high utilization of a line of credit can reduce your score. Keeping usage below 30% of your limit is recommended.