Learn more about how overdrafts work

It’s important to remember that an overdraft has associated charges, but you’ll only pay interest if you use it.

If you’re looking to understand more about how much interest you’d pay based on your own circumstances and borrowing amount, head on over to our Overdraft cost calculator.

EAR stands for Effective Annual Rate.

This is equivalent to the rate of interest you’ll pay if you’re overdrawn for a year. You’ll pay interest on the amount you’re overdrawn by, and on the interest that builds up from being overdrawn. So you’ll pay less if you regularly pay off your overdraft. EAR doesn’t include other fees that may be charged.

APR stands for Annual Percentage Rate.

It is calculated in the same way as the EAR. APR is a way that lenders show the interest and additional charges you will pay on what you’re borrowing. APR can also be referred to as the ‘full cost of borrowing’. But we don’t charge any other fees for using an overdraft, so our EAR and APR are the same.

You can use our Overdraft cost calculator to work out how much interest you’d pay based on your own circumstances and borrowing amount.

At Shostra Bank, we don’t charge fees for using your overdraft, just interest. If you’re looking to understand more about how much interest you’d pay based on your own circumstances and borrowing amount, head on over to our Overdraft cost calculator.

It’s important to know that there are other charges associated with overdrafts such as an Unpaid Transaction Fees. An Unpaid Transaction Fee is charged for a transaction that is returned unpaid by your bank or lender. A transaction (e.g. a Direct Debit) will be returned if the payment cannot be met from funds in your account or any unused arranged overdraft facility and your bank decides (at their discretion) not to make the payment.

Monthly cap on unarranged overdraft charges

Usually there is a cap on unarranged overdraft charges. This means you won’t be charged more than a certain amount in a charging period for an unarranged overdraft or unpaid transaction.

1. Each current account will set a monthly maximum charge for:

• going overdrawn when you have not arranged an overdraft; or
• going over/past your arranged overdraft limit (if you have one).

2. This cap covers any:

• interest for going over/past your arranged overdraft limit;
• fees for each payment your bank allows despite lack of funds; and
• fees for each payment your bank refuses due to lack of funds.

The monthly cap on unarranged overdraft charges for our standard adult current accounts is £19.40.

To find out more about our fees, please read the ‘Overdraft fees and charges’ section in our Useful information about overdrafts.