Nationwide BS, how about 40% EAR/APR Overdraft Charges?

[Deleted User]

SnowTiger wrote: »

Your dead mother struggles to pay her energy bill?

Only afterlife as we know it passed her by.

[Deleted User]

antrobus wrote: »

I'm not convinced you actually understand the data presented,

You show me yours and I'll show you mine. We would be so grateful for your explanation of what it means.

[Deleted User]

Heng_Leng wrote: »

It will be interesting to see what happens long term - the app banks and some other smaller providers will be able to make inroads with a 40% EAR for overdrafts.

I agree. Nationwide demonstrate the difference between the two regimes using an online calculator however, they do not say which authority checked out the results so do we have to take it on faith that the resulting figures are accurate?

We know the stated EAR figures and we also know from their General Terms and Conditions on page 7...

30. Where overdraft interest applies to your overdraft, it will be calculated on a daily basis on the overdrawn balance outstanding and will be debited from your account on a monthly basis. Any overdraft interest we add will increase the overdrawn balance you owe us (and we charge interest on the new balance) from the day it is added to your account.

...that the interest is compounded daily. General formulae, for EAR calculations are available on the internet so all it needs is a Money Saving Expert to double check the results.

Note: the calculator does not work passed 31 days because amounts are compounded monthly. So a table is needed to show the effect of interest on a monthly basis presuming the overdraft is not paid down to zero.

[Deleted User]

boo_star wrote: »

I'm guessing those figures are from US banks. US banking is very different to that in the UK.

You can download the raw data that made up the sample as a spreadsheet. The sample is made up of global banking data and is not restricted to only to the US.

eskbanker

[Deleted User] wrote:

I agree. Nationwide demonstrate the difference between the two regimes using an online calculator however, they do not say which authority checked out the results so do we have to take it on faith that the resulting figures are accurate?

We know the stated EAR figures and we also know from their General Terms and Conditions on page 7...

30. Where overdraft interest applies to your overdraft, it will be calculated on a daily basis on the overdrawn balance outstanding and will be debited from your account on a monthly basis. Any overdraft interest we add will increase the overdrawn balance you owe us (and we charge interest on the new balance) from the day it is added to your account.

...that the interest is compounded daily. General formulae, for EAR calculations are available on the internet so all it needs is a Money Saving Expert to double check the results.

Note: the calculator does not work passed 31 days because amounts are compounded monthly. So a table is needed to show the effect of interest on a monthly basis presuming the overdraft is not paid down to zero.

Are you seriously suggesting that a major financial institution is either incapable of applying a routine and basic banking calculation or requires their figures to be validated by an independent third party?! :rotfl:

[Deleted User]

eskbanker wrote: »

Are you seriously suggesting that a major financial institution is either incapable of applying a routine and basic banking calculation or requires their figures to be validated by an independent third party?! :rotfl:

Mmmn! Banking crisis 2008 ring any bells?

To obtain the interest figure for a period of days this general formula applies: FV = PV * (1 + i)^n where FV = Final Value, PV is the Present Value, i = EAR rate and n = the exponential calendar period.

The website Candid Money offers an overdraft calculator to validate the Nationwide calculator but what does the math look like? The example below demonstrates how the general equation is being used.

For an overdaft of £300 with an EAR of 39.9% over 31 days the following Excel equation will give the interest to be added and carried down at the end of the month:

=300*POWER(1+0.399,31/365)-300 = £8.68

Nationwide states the figure as £8.39 but rounding errors of a penny are acceptable. The overdraft for 365 days becomes £419.70 making the interest earned by Nationwide as £119.70 for the whole year. :idea:

Thrugelmir

[Deleted User] wrote:

What stood out was banking gross margins operate at 100%

I'd be concerned if it wasn't a 100%.

eskbanker

[Deleted User] wrote:

eskbanker wrote: »

Are you seriously suggesting that a major financial institution is either incapable of applying a routine and basic banking calculation or requires their figures to be validated by an independent third party?! :rotfl:

Mmmn! Banking crisis 2008 ring any bells?

Again you seem unable or unwilling to sustain a consistent and logical line of argument - what possible relevance does a global financial crisis over a decade ago have to a simple calculation of overdraft interest?

[Deleted User] wrote:

<dummy's guide to EAR>

Er, thanks for that. Still no idea what your point is though....

[Deleted User]

Thrugelmir wrote: »

I'd be concerned if it wasn't a 100%.

Please explain why you are concerned and provide the math or a link to a calculator to demonstrate your point.

Thrugelmir

[Deleted User] wrote:

Please explain why you are concerned and provide the math or a link to a calculator to demonstrate your point.

Because they'd be something very wrong. Rather than a calculator I'd read the annual statutory accounts.