We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Understanding student overdraft interest rates

Hello,

I am a university graduate who is approaching the final year of his student overdraft.

My bank have recently written to me saying that the interest free part of my overdraft is reducing to £500 at the end of next month. The interest rate is 17.81% p.a. for all balances over £500.

I am currently around £1,400 into my overdraft. My question is, how am i likely to see the impact of this?
Will the interest appear on a monthly basis until my balance is below £500, or will they take a lump sum at the end of the year?

My concern is that last year my bank wrote to me saying that the interest free part of my overdraft was reducing to £1000, however I am yet to see any interest charges.

The "per annum" part of the interest rate makes me worry that at the end of next month I will be charged an interest rate for all balances over the £1000.

Is this correct?

Any help would be much appreciated.

Thanks

Comments

  • palaran
    palaran Posts: 32 Forumite
    Overdraft interest is normally added on a monthly basis. The per annum rate is the compounded rate that you would expect (ie taking into account that interest added in January will then itself gain a little bit of interest in February and so on).

    If you did not see any interest charges then it is likely that they forgot to reduce the interest free part.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.9K Work, Benefits & Business
  • 617.2K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.