What Is the EAR Overdraft Rate? | moneyfacts.co.uk

Published: 01/03/2019

At a glance

  • EAR stands for equivalent annual rate – a representative interest rate that shows the rate you would pay if you remained overdrawn on your current account for a year.
  • Depends on the simple rate of interest, how often it is charged, and the effect of compound interest.
  • EAR does not take into account other fees.

EAR is short for equivalent annual rate, which is the interest rate you are charged if you go overdrawn on your current account.

How is the EAR worked out?

EAR is a representative interest rate that shows the rate you would pay if you remained overdrawn for a year. It is determined by:

  • The simple rate of interest you are charged if you go overdrawn;
  • The frequency with which interest is charged; and
  • The effect of compound interest on your debt.

EAR doesn't include other account fees

Bear in mind that the equivalent annual rate doesn't take into account any other account fees, which you may also be charged, such as an account fee.

However, all overdraft providers must not also publish an Annual Percentage Rate (APR) which does include some other fees. You can now use the APR to compare overdraft rates more fully. You will see an APR on all advertising for current accounts, including websites.

Moneyfacts tip

Moneyfacts tip Michelle Monck

You may also be interested in learning how current account overdrafts work or how to stay overdraft free.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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At a glance

  • EAR stands for equivalent annual rate – a representative interest rate that shows the rate you would pay if you remained overdrawn on your current account for a year.
  • Depends on the simple rate of interest, how often it is charged, and the effect of compound interest.
  • EAR does not take into account other fees.

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