Going overdrawn /Interest

[Mike]

Hi all

I need to use my £500.00 overdraft with the TSB

Accordding to their website site the rate of interest per month is 1.40% (18.2% EAR) So if I am over drawn by £500.00 for one month how much would I pay ) is it simply 500*1.40 = £7.00 ????

Any ideas before I have to sell my body on ebay

Thanks

Mike

[Paul]

Some banks charge interest plus a a fee for going over your limit. Might be an idea to ring them and ask.

[Chris]

Originally Posted by Mike

Hi all

I need to use my £500.00 overdraft with the TSB

Accordding to their website site the rate of interest per month is 1.40% (18.2% EAR) So if I am over drawn by £500.00 for one month how much would I pay ) is it simply 500*1.40 = £7.00 ????

Any ideas before I have to sell my body on ebay

Thanks

Mike

Work it out based on the annual figure (18.2%) and then divide by 12 to find out roughly how much per month they will charge you. You could simply work it out based on the monthly percentage, but this does not include any fees or charges they are almost certain to make on top of the interest itself and, IIRC, won't help you to allow for compounding of the interest (i.e. if you are £500 overdrawn and don't pay off the £7 after month one, they will charge you interest on £507 the next month). The Annual Equivalent Rate, on the other hand, tells you what the effective interest rate is once all the fees and compound interest are added as well.

For example, if you go overdrawn by £500, one month's interest at 1.4% is indeed £7. However, 12 months at 18.2% is £91, or £7.58 per month.

[Scarlett]

That sounds a high interest rate for an authorised overdraft... unauthorised yes but no if you've arranged it with them in advance.


EDIT:
Now I remember why I bank with nationwide... Authorised rate of 7.75%...

LloydsTSB Classic 18.20
Natwest Current Plus 17.69
Barclays Bank Account 15.60
HSBC Bank Account 14.80
Nationwide current Acc 7.75

[Mike]

Originally Posted by Scarlett

That sounds a high interest rate for an authorised overdraft... unauthorised yes but no if you've arranged it with them in advance.


EDIT:
Now I remember why I bank with nationwide... Authorised rate of 7.75%...

LloydsTSB Classic 18.20
Natwest Current Plus 17.69
Barclays Bank Account 15.60
HSBC Bank Account 14.80
Nationwide current Acc 7.75

Thanks everyone..............yes it is an authorised OD but on an really old account hence the higher rate of interest. I normally do not use it but my car 'blow' up yesterday so I expecting a lareg bill.

Thanks again

Mike
__________________

[QUOTE=Chris T], but this does not include any fees or charges they are almost certain to make on top of the interest itself and, IIRC, won't help you to allow for compounding of the interest (iQUOTE]

Yuck...........what extra fess are you referring to ?

[Wicked_and_Crazy]

1.4% is your monthly interest 18.2% is the annual rate by compounding the interest each month over the whole year assuimng that you didnt pay anything off (ie you pay interest in the second month of the £500 plus the last months interest amonut)

Months Interest Total

1 7.00 507
2 7.10 514.10
3 7.20 521.30
4 7.30 528.59
5 7.40 535.99
6 7.50 543.50
7 7.61 551.11
8 7.72 558.82
9 7.82 566.65
10 7.93 574.58
11 8.04 582.62
12 8.16 590.78


90.78/500 = 18.2%