Why is my effective rate so much higher than the quoted one?

Fixed fees. Spread over a few days they annualise to enormous numbers, which is why brief overdrafts are the expensive kind.

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Overdraft Interest Calculator

Overdraft cost including fees. Fixed fees make short overdrafts far more expensive than the interest rate suggests, and a few days at a flat fee can annualise into triple digits.

Also called: overdraft cost calculator, od interest.

Total cost

₹1,422

₹1,422 for 22 days overdrawn: ₹922 of interest plus ₹500 in fees. Annualised, that is 27.76% on the amount, which is well above the headline 18%.

Interest

₹922

Fees

₹500

Cost per day

₹65

Effective annual rate

27.76%

Cost per 1,000 overdrawn

₹17

How this is calculated

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

Interest accrues daily on the balance actually overdrawn. Fixed fees are where short overdrafts become expensive: a five hundred rupee arrangement fee on a three day overdraft costs more than the interest several times over, and the effective annual rate on that combination is startling. The effective rate shown here includes the fees, which is the honest comparison against any other borrowing.

interest accrues daily on the amount actually overdrawn

A: Amount overdrawn
d: Days

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

twenty-two days overdrawn

Amount overdrawn: ₹85,000
Annual rate: 18%
Days overdrawn: 22
Arrangement or setup fee: ₹500
Daily fee if any: ₹0

Total cost₹1,422

85,000 x 18% / 365 x 22

Open this example

no fees leaves the headline rate

Amount overdrawn: ₹85,000
Annual rate: 18%
Days overdrawn: 365
Arrangement or setup fee: ₹0
Daily fee if any: ₹0

Total cost₹15,300

boundary: a full year with no fees

Open this example

Method and limits

What it assumes

A constant overdrawn balance throughout.

What it deliberately does not model

Some accounts charge on the sanctioned limit rather than the amount drawn.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why is my effective rate so much higher than the quoted one?: Fixed fees. Spread over a few days they annualise to enormous numbers, which is why brief overdrafts are the expensive kind.