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Understanding student overdraft interest rates

danhenshy23
Posts: 52 Forumite


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
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
0
Comments
-
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.0
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