01
The line fee
Charged on the approved limit whether or not the account is overdrawn. On a facility used lightly it is most of the annual cost, and it is the reason an oversized limit is wasteful.
Calculator
An overdraft costs what it carries , not what it allows.
Interest accrues daily on the overdrawn balance, so the cost is a function of how far below zero the account sits and for how long.
Last reviewed 8 September 2026
Indicative interest cost
Weekly
$121/week
$525 /month $6,300 a year while drawn
$100,000
$5,000 $500,000
$45,000
Nothing drawn Fully drawn
14.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $100,000 scenario
$45,000 drawn at 14.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
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What this tool calculates
The interest on an average overdrawn balance.
An overdraft has no repayment schedule, so there is no repayment to compute. The tool gives the interest cost of carrying an average overdrawn balance across a year. The line fee on the limit is charged whether or not the account is overdrawn, and adding it gives the annual total.
Finding the input
The average overdrawn balance is in the statements.
Most businesses estimate their overdraft usage from how it feels, and the feeling is usually wrong in one direction or the other. Twelve monthly closing balances added and divided by twelve is a reasonable approximation and takes ten minutes with the statements.
A more useful version records the lowest balance in each month as well. The average tells the business what the facility costs; the sequence of lows tells it whether the facility is still revolving, which is the more important question.
For a business that has never been in credit across the twelve months, the exercise usually produces a larger number than expected, and it is the number worth comparing against what a term facility would have charged for the permanent portion.
Worked totals
A $100,000 overdraft, three usage patterns.
Illustrative at an indicative 14% with a 0.5% line fee. The third row is the one worth doing something about.
| Pattern | Average overdrawn | Interest | Annual total |
|---|---|---|---|
| Swings between credit and debit | $18,000 | ~$2,520 | ~$3,020 |
| Regularly drawn, clears each quarter | $45,000 | ~$6,300 | ~$6,800 |
| Never returns to credit | $78,000 | ~$10,920 | ~$11,420 |
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
The third row
What hardened core debt is costing.
An account that never returns to credit is carrying permanent borrowing at overdraft pricing. On the figures above, roughly $78,000 of that balance is not fluctuation, and a term facility at a lower rate would carry the same money for meaningfully less while a schedule cleared it.
The ordinary remedy is to term out the core, converting the permanent portion into a scheduled facility and leaving a smaller overdraft for genuine fluctuation. That reduces the interest, restores headroom and reviews better.
Banks generally welcome that conversation because it improves their position too. Raising it before a review is a considerably better sequence than having it raised at one.
What is not in the figure
Four costs an interest calculation cannot reach.
Each of these appears on a statement rather than in a rate, and together they can be a substantial share of what an overdraft costs across a year.
02
Excess and dishonour fees
Charged where the limit is passed or a payment fails. Small individually and disproportionate in what they signal to the bank, and both avoidable by watching headroom rather than the balance.
03
Review and renewal charges
Applied periodically, and where security requires revaluation the associated costs come with them. Across several years they can exceed the establishment fee nobody negotiated.
04
Capitalised interest
Where the monthly charge is debited to the facility rather than paid separately, it joins the balance and accrues interest itself from the following day.
What the tool does
The arithmetic behind the figures, and what it leaves out.
In revolving mode the calculator applies the annual rate to an average drawn balance and reports the interest cost of carrying that balance. It deliberately does not produce a repayment figure, because a revolving facility has no repayment schedule and a figure implying one would misdescribe the product.
It excludes every fee. Line fees, establishment fees, review and renewal charges, excess fees and any security disbursements are all real and none of them is here, because they vary by lender in ways no formula can anticipate. On a facility held largely undrawn, the line fee is most of the annual cost, so the figure produced here is a floor rather than an estimate.
It also excludes any tax effect and anything specific to a business. It is a way of seeing how the amount drawn and the rate interact before a conversation with a lender, and it is not a quote, an application or an offer of credit. Nothing entered here is transmitted anywhere.
References
Sources
- Reserve Bank of New Zealand, interest rate statistics
Context for why indicative rate bands move over time rather than being fixed figures.
- Commerce Commission
The regulator whose guidance covers fee disclosure and representations about cost.
- Personal Property Securities Register
The register whose search and filing fees appear as disbursements on a secured facility.
- Financial Service Providers Register
Where a New Zealand lender’s registration can be confirmed before an application is made.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
The overdraft calculation, questions
How is overdraft interest calculated?
Ordinarily daily on the overdrawn balance at a daily equivalent of the annual rate, accumulated through the month and charged at month end. The cost is therefore a function of how far below zero the account sits and for how long.
What should I enter as the average overdrawn balance?
Twelve monthly closing balances from the statements, added and divided by twelve. It takes ten minutes and it is considerably more accurate than estimating from how the account feels.
Does the tool include the line fee?
No. The line fee applies to the limit rather than the balance and is charged whether or not the account is overdrawn. Adding it to the interest figure gives the annual total.
What is core debt?
The portion of an overdraft that never comes back down. It is permanent borrowing carried at overdraft pricing, and the ordinary remedy is to convert that portion into a term facility at a lower rate.
How do I tell whether I have core debt?
Record the lowest balance reached in each month across a year. Where that figure never approaches zero, the amount it never falls below is core debt whatever it is called.
Is an overdraft more expensive than a term loan?
Per dollar of permanent borrowing, ordinarily yes, because overdraft rates are priced for temporary use. For genuine fluctuation the comparison reverses, because a term loan charges on the whole amount throughout.
Are the figures here quotes?
No. Everything on this page is indicative and illustrative. Actual rates, fees and limits come from a lender after assessment, and nothing here is an offer of credit.
Is anything entered here transmitted?
No. The calculator runs entirely in the browser, nothing is sent anywhere and no personal details are collected on this site at all.