Are you wondering how much it will cost you to use an overdraft facility in Canada? Look no further! Our easy-to-use calculator will help you determine the interest you’ll pay on your overdraft.
Overdrafts can be convenient for those times when unexpected expenses arise or when you need to bridge the gap between paychecks. However, it’s important to understand the cost associated with using this financial tool. With our calculator, you can quickly and accurately calculate the interest charges on your overdraft, giving you a clear picture of how much it will cost you in the long run.
Our calculator takes into account the interest rate on your overdraft, as well as the length of time you anticipate using it. Simply input these details, and our calculator will do the rest. It’s that easy! Whether you’re a student trying to make ends meet or a small business owner managing cash flow, our calculator is a valuable resource to help you plan and budget effectively.
Don’t let overdraft fees catch you off guard. Stay in control of your finances with our handy calculator. Calculate your overdraft interest today and take the first step towards financial peace of mind.
What is an Overdraft Interest?
An overdraft interest refers to the cost of borrowing money from your bank account in Canada, which goes beyond the available balance. It is essentially an interest charge that you incur when you spend more money than you have in your account.
When you have overdraft protection with your bank, they may cover your transactions even if you don’t have sufficient funds in your account. However, this service comes at a cost. The bank will charge you an overdraft interest on the amount you borrow, usually calculated as a percentage of the overdrafted amount.
Overdraft interest rates can vary among banks in Canada. Some banks may charge a flat daily fee, while others may charge a percentage interest rate that accrues daily or monthly. It’s essential to review the terms and conditions of your bank to understand the specific overdraft interest rates and fees they charge.
Using a calculator like ours can help you estimate the amount of overdraft interest you may be charged based on your bank’s rates and your overdrafted amount. This can give you a better understanding of the cost of borrowing money through overdraft, helping you make informed financial decisions.
Note: It is crucial to manage your finances responsibly to avoid excessive overdraft interest charges. Make sure to keep track of your account balance and only use overdraft when necessary. Consider alternative options such as budgeting and saving to maintain a positive balance in your account and minimize overdraft fees.
How does Overdraft Interest work?
Understanding how overdraft interest works is essential for managing your finances effectively. When you have a negative balance in your bank account, also known as an overdraft, your bank may charge you interest on the amount borrowed.
Key factors in calculating overdraft interest:
1. Interest Rate: The interest rate set by your bank determines how much you will owe in interest on your overdraft. This rate will vary depending on your bank and the type of account you have.
2. Account Balance: The amount you owe in overdraft interest is based on your negative balance or the amount you have borrowed. The higher the balance, the more interest you will be charged.
How to use the Overdraft Interest Calculator:
Our calculator allows you to determine how much you will owe in overdraft interest based on the interest rate and the amount of your negative balance. Simply input the required information, and the calculator will provide you with an estimate of the interest owed.
It is important to remember that overdraft interest is typically charged daily or monthly, depending on your bank. This means the longer you stay in overdraft, the more interest you will accumulate. It is advisable to clear your overdraft balance as soon as possible to minimize interest charges. Consult with your bank for more information on their specific overdraft policies and interest calculation methods.
Understanding Overdraft Interest Charges
When it comes to managing your finances in Canada, it’s important to understand how overdraft interest charges work. An overdraft occurs when you spend more money than you have in your bank account.
Many banks offer overdraft protection, which allows you to make purchases or withdraw cash even if you don’t have enough funds in your account. However, this convenience comes at a cost in the form of interest charges.
Overdraft interest charges are the fees that banks charge for allowing you to use funds that you don’t have. The specific interest rate can vary depending on the bank and the type of account you have. It’s important to carefully review the terms and conditions of your account to understand what interest rate applies to your overdraft.
Interest charges on overdrafts are typically calculated daily or monthly. Daily interest calculations take into account the daily balance of your overdraft, while monthly calculations calculate the average monthly balance. The interest is then added to your account on a regular basis.
It’s important to note that overdraft interest charges can quickly add up if you consistently spend more money than you have in your account. It’s a good practice to regularly review your account balance and make sure you have sufficient funds to cover your expenses to avoid paying unnecessary fees.
If you’re unsure about the specifics of your overdraft interest charges, it’s a good idea to reach out to your bank and ask for clarification. They will be able to provide you with the specific details and help you understand how much you may be paying in interest on your overdraft.
| Bank | Overdraft Interest Rate |
|---|---|
| Bank A | 1.5% |
| Bank B | 2% |
Why is it important to calculate Overdraft Interest?
When it comes to managing your finances in Canada, it is crucial to calculate overdraft interest. Understanding how overdraft interest works can help you make informed decisions and take control of your financial situation.
An overdraft occurs when you withdraw more money from your bank account than you have available. In such cases, the bank may loan you the additional funds to cover the shortfall, but they will charge you interest on the borrowed amount.
Calculating the overdraft interest helps you determine the actual cost of borrowing, allowing you to evaluate whether it is financially feasible for you. By using a calculator specifically designed for overdraft interest in Canada, you can easily estimate the interest charges associated with the overdrafted amount.
Knowing the overdraft interest allows you to budget effectively and plan your repayments. It helps you avoid surprises and potential financial strain by giving you a clear picture of the amount you need to pay back.
Moreover, calculating overdraft interest empowers you as a consumer to compare different banking or credit options. It enables you to make an informed decision about which institution offers the most favorable terms and conditions, helping you save money in the long run.
In summary, calculating overdraft interest is important in Canada as it allows you to understand the cost of borrowing and make informed financial decisions. It helps you budget effectively, plan repayments, and choose the best banking option for your needs. By utilizing a calculator, you can simplify the process and have a clearer understanding of your financial obligations.
Budgeting and Financial Planning
When it comes to managing our finances, budgeting and financial planning play a crucial role in ensuring our financial well-being. It involves carefully tracking and controlling our income and expenses, making informed decisions about saving and investing, and understanding how interest rates and fees can affect our overall financial health.
The Importance of Budgeting
Budgeting allows us to have a clear picture of our financial situation. By creating a budget, we can identify our sources of income and categorize our expenses. This helps us understand where our money is being spent and where we can make adjustments to achieve financial goals.
One aspect of budgeting that often gets overlooked is planning for unexpected expenses, such as overdraft fees. An overdraft occurs when we spend more money than we have available in our checking account, resulting in a negative balance. This can happen when we forget to track our expenses or when unexpected expenses arise. Understanding how overdraft interest works is crucial in preventing further financial burden.
Overdraft Interest in Canada
In Canada, overdraft interest rates and fees can vary depending on the financial institution and the type of account. Typically, overdraft interest is calculated as a percentage of the negative balance and is charged daily until the balance is brought back to positive.
Financial institutions in Canada often have overdraft protection options available, such as linking a savings account or a line of credit to your checking account to cover any overdrafts. This can help avoid excessive overdraft fees and reduce your overall interest charges.
It is important to review the terms and conditions of your account to understand the specific overdraft interest rates and fees that apply. By incorporating this information into your budgeting and financial planning, you can better prepare for unexpected expenses and avoid unnecessary financial stress.
Comparison with Other Borrowing Options
If you are considering borrowing money, it is important to look at all of your options before making a decision. Overdrafts can be a convenient way to access funds quickly, but they may not always be the most cost-effective option. Here, we compare overdrafts with other borrowing options available in Canada.
Personal Loans
Personal loans are a popular choice for borrowing money in Canada. With a personal loan, you can borrow a fixed amount of money over a fixed period of time, and repay it in equal monthly installments. Personal loans usually have lower interest rates than overdrafts, especially if you have a good credit score. However, they often require a more thorough application process and may take longer to access the funds.
Credit Cards
Credit cards are another common borrowing option. They allow you to make purchases and pay them off over time, with the option to pay the minimum amount due or the full balance each month. While credit cards can be convenient for short-term borrowing, they typically have higher interest rates than overdrafts. If you consistently carry a balance on your credit card, the interest charges can quickly add up.
Using our calculator, you can compare the interest charges of an overdraft with those of a personal loan or a credit card based on your specific borrowing needs.
How to calculate Overdraft Interest in Canada?
If you have an overdraft in Canada, it’s important to understand how the interest on that overdraft is calculated. By knowing the calculations, you can better manage your finances and budget accordingly.
In order to calculate overdraft interest, you will need to know the interest rate and the balance of your overdraft. The interest rate is typically expressed as an annual percentage rate (APR), and the balance is the amount that you have borrowed on your overdraft.
To calculate the interest on your overdraft, you can use the following formula:
1. Calculate the monthly interest rate
The first step is to calculate the monthly interest rate. This can be done by dividing the annual interest rate by 12. For example, if the annual interest rate is 12%, the monthly interest rate would be 1% (12% / 12).
2. Calculate the interest charged for the month
Next, you can calculate the interest charged for the month by multiplying the monthly interest rate by the balance of your overdraft. For example, if your overdraft balance is $1,000 and the monthly interest rate is 1%, the interest charged for the month would be $10 (1% * $1,000).
It’s important to note that some banks may have a minimum monthly fee for overdrafts, so make sure to check with your bank for any additional charges.
By understanding how to calculate overdraft interest in Canada, you can make informed decisions about your finances and budget accordingly.
Using Our Calculator
When it comes to calculating overdraft interest in Canada, our calculator is an invaluable tool. Whether you are a Canadian resident or planning a visit to the country, understanding the potential costs of overdraft fees can help you better manage your finances.
To use our calculator, simply input the relevant information such as your account balance, the interest rate charged by your bank, and the duration for which you expect to be in an overdraft situation. The calculator will then provide you with an estimate of the interest you may incur during that period.
Here are the steps to use our calculator:
- Gather the necessary information, such as your current account balance and the overdraft interest rate charged by your bank.
- Visit our website and navigate to the overdraft interest calculator.
- Enter your account balance and select the currency (Canadian dollars).
- Input the interest rate charged by your bank for overdrafts. This information can typically be found in your account terms and conditions or by contacting your bank directly.
- Specify the duration of time for which you expect to be in an overdraft situation.
- Click the “Calculate” button to generate the estimated interest amount.
Once the calculation is complete, you will be provided with an estimate of the interest that may be charged based on the inputted information. This can give you a clearer understanding of the potential costs associated with overdrafts in Canada.
Keep in mind that the calculator provides an estimate and may not reflect the exact amount charged by your bank. It’s always recommended to consult with your financial institution for more accurate and personalized information regarding overdraft interest rates.
Using our calculator can help you make more informed decisions about managing your finances and avoiding unnecessary overdraft fees in Canada.
Manual Calculation Method
If you prefer to calculate your overdraft interest manually, you can use the following formula:
| Step | Description |
|---|---|
| 1 | Determine the annual interest rate for your overdraft. This information can be found in your account terms and conditions or by contacting your bank. |
| 2 | Convert the annual interest rate to a daily rate by dividing it by 365 (or 366 for leap years). |
| 3 | Calculate the average daily balance of your overdraft by summing up the daily balances for the billing period and dividing it by the number of days in the billing period. |
| 4 | Multiply the average daily balance by the daily interest rate to calculate the daily interest charge for your overdraft. |
| 5 | Multiply the daily interest charge by the number of days in the billing period to get the total interest charge for that period. |
Keep in mind that this manual calculation method can be time-consuming and prone to errors. It is highly recommended to use an online calculator or consult with your bank to ensure accurate and up-to-date calculations of your overdraft interest in Canada.
Factors Affecting Overdraft Interest Rates in Canada
Overdrafts are a common way for individuals in Canada to borrow money from their bank. With an overdraft, you are able to withdraw more money than is available in your account, up to a certain limit. However, this convenience comes at a cost in the form of interest charges. The interest rate for overdrafts in Canada can vary depending on a number of factors.
1. Credit History
One of the main factors that affects the interest rate on an overdraft in Canada is your credit history. Banks will typically review your credit report and take into account your credit score when determining the interest rate for your overdraft. If you have a poor credit history, you may be charged a higher interest rate as a result of the increased risk to the bank.
2. Relationship with the Bank
Your existing relationship with the bank may also impact the interest rate on your overdraft. If you have been a long-standing customer and have other accounts or loans with the bank, they may be more willing to offer you a lower interest rate on your overdraft as a way to retain your business.
It’s important to note that interest rates for overdrafts in Canada are typically higher than those for other forms of borrowing, such as personal loans or credit cards. This is because overdrafts are considered to be a riskier form of lending due to their unsecured nature and the potential for the borrower to exceed their limit.
In conclusion, factors such as credit history and relationship with the bank can affect the interest rate on overdrafts in Canada. It’s crucial to carefully consider these factors and compare rates from different banks before choosing an overdraft facility.
Bank Policies and Regulations
When it comes to managing your money and dealing with financial institutions, it is important to understand the bank policies and regulations that govern the industry. In Canada, banks have specific guidelines in place to protect consumers and ensure fair practices. Two areas that are commonly regulated are interest rates and overdraft fees.
Interest rates play a crucial role in banking transactions, including overdrafts. Banks charge interest on the amount of money you borrow through an overdraft. The interest rate varies depending on the bank and the type of account you have. It is important to carefully review the terms and conditions of your account to understand the interest rate associated with an overdraft.
Overdrafts allow account holders to withdraw more money than what is currently available in their accounts, up to a certain limit. While overdrafts can be a convenient way to access additional funds, they often come with fees and interest charges. The specific fees and interest rates associated with overdrafts will depend on the bank and the terms of your account.
Canadian banks are required to disclose all fees associated with overdrafts and provide transparent information about interest rates. This is done to ensure that consumers have a clear understanding of the costs involved and can make informed decisions about their finances.
In addition to interest rates and overdraft fees, banks in Canada are subject to various regulations that are designed to protect consumers. These regulations may include requirements for financial disclosures, privacy protection, and dispute resolution mechanisms. By enforcing these regulations, the government aims to maintain a fair and transparent banking system.
It is important to familiarize yourself with the bank policies and regulations in Canada to ensure that you have a clear understanding of what to expect from your financial institution. By being aware of the rules and regulations, you can make informed decisions about your finances and protect your interests.
Current Market Rates
When considering an overdraft in Canada, staying informed about current market rates is crucial. Understanding the interest rates offered by different financial institutions can help you make an informed decision and choose the best option for your financial needs.
With the help of our Canada Overdraft Calculator, you can easily calculate the interest you would pay based on current market rates. By inputting the amount of your overdraft and the interest rate, the calculator will provide you with an estimate of the total interest you can expect to pay over a specific period.
Factors Affecting Market Rates
Market rates for overdrafts in Canada are influenced by several factors, including:
- Economic Conditions: The overall state of the economy, such as inflation rates and economic indicators, can impact the market rates for overdrafts.
- Competition: The competitive landscape among financial institutions can influence the rates they offer, as they strive to attract and retain customers.
- Central Bank Policies: The policies and interest rate decisions of the central bank, such as the Bank of Canada, can have an impact on market rates.
Comparing Rates
When comparing overdraft rates, it’s important to consider both the interest rate and any associated fees or charges. Some institutions may offer lower interest rates but charge higher fees, while others may have higher interest rates but lower fees.
Using our Canada Overdraft Calculator can help you determine the total cost of an overdraft, taking into account both the interest rate and fees. This can assist you in making a well-informed decision by considering the full financial impact of different options.
Remember, market rates can change over time, so it’s important to stay up to date and regularly review the rates offered by various financial institutions. By doing so, you can ensure that you are getting the best possible deal for your overdraft needs.
Other Fees and Charges Associated with Overdraft Interest
When it comes to overdraft interest in Canada, it’s important to understand that there may be additional fees and charges associated with this service. While the primary focus is usually on the interest rate itself, there are other costs that can potentially add up.
One common fee is an overdraft fee, which is charged when your account goes into overdraft. This fee can vary depending on the specific financial institution, so it’s essential to review the terms and conditions of your account to understand the exact amount you may be charged.
Another potential charge is a non-sufficient funds (NSF) fee. This fee is typically applied if you attempt to make a payment or withdrawal from your account, but don’t have enough funds available. It’s important to note that NSF fees can be significant and can add to the overall cost of using overdraft services.
Some banks in Canada also charge a daily or monthly fee for maintaining an overdraft protection service. This fee is usually separate from both the interest rate and any overdraft or NSF fees. It’s essential to understand all fees and charges associated with overdraft interest to ensure you have a clear picture of the costs involved.
When considering overdraft interest in Canada, it’s crucial to remember that the specific fees and charges can vary depending on the financial institution and the terms of your account. It’s always a good idea to review the details of your account and consult with your bank to understand the specific costs involved.
Keep in mind that overdraft interest should be used responsibly and as a temporary solution, as the accumulation of fees and charges can become costly over time. It’s important to maintain a solid understanding of your finances and explore other options if you find yourself consistently relying on overdraft services.
Overall, while overdraft interest can provide a convenient service, it’s essential to be aware of all associated fees and charges in order to make informed financial decisions.
Overdraft Fees
Overdraft fees in Canada can be a major source of frustration for many individuals. When you use more money than what you have available in your bank account, you enter into an overdraft situation. This means that the bank lends you money to cover the shortfall, but it comes at a cost.
The fees associated with overdrafts can vary depending on the bank and the specific terms of your account. It’s important to be aware of the fees that you may incur if you find yourself in an overdraft situation.
Common Types of Overdraft Fees
There are several common types of overdraft fees that you may encounter:
- Overdraft Transfer Fees: Some banks charge a fee when funds are automatically transferred from your linked account to cover an overdraft in your checking account.
- Overdraft Protection Fees: If you have overdraft protection on your account, there may be a fee associated with this service. Overdraft protection typically involves a line of credit or a linked savings account that is used to cover overdrafts.
- Nonsufficient Funds (NSF) Fees: When a transaction is attempted but there are not enough funds in your account to cover it, you may be charged an NSF fee. This fee is typically charged to the merchant, but some banks may pass it along to you as well.
Calculating Overdraft Fees
Calculating overdraft fees can be complicated, which is why using a calculator can be extremely helpful. With our calculator, you can easily determine the potential fees you may be charged based on the amount of the overdraft and the specific terms of your account.
By inputting the relevant information into the calculator, such as the overdraft amount and the bank’s fees, you can quickly see the estimated cost of an overdraft. This can help you make informed decisions and avoid unnecessary fees.
Remember that overdraft fees can add up quickly, so it’s important to closely monitor your account and take steps to avoid entering into an overdraft situation whenever possible.
NSF Fees
In Canada, if you have an overdraft and do not have sufficient funds to cover the transaction, you may be charged an NSF fee. “NSF” stands for “Non-Sufficient Funds.” These fees are charged by the bank to cover the cost of processing the transaction and to compensate for the potential risk they undertake by granting you an overdraft.
The amount of the NSF fee varies between banks, but it is typically in the range of $25 to $50 for each overdraft transaction that is not covered. This means that if you make multiple overdraft transactions without sufficient funds, you may be charged multiple NSF fees.
It is important to keep track of your bank account balance and avoid overdrawing your account whenever possible to avoid these fees. Some banks may offer overdraft protection services, where they will transfer funds from your savings account or line of credit to cover the overdraft, thereby avoiding NSF fees.
If you have incurred NSF fees, it is a good idea to contact your bank and discuss the situation with them. They may be willing to waive or reduce the fees, especially if it is your first time overdrawing your account. However, this is at the discretion of the bank and not guaranteed.
Remember to always read and understand the terms and conditions of your bank account to avoid any surprises and additional costs.
Tips to avoid or minimize Overdraft Interest
Overdraft interest can be a costly burden, but with careful planning and smart financial habits, you can avoid or minimize these charges in Canada. Here are some tips to help you stay on top of your finances:
1. Monitor your account regularly
Keep a close eye on your bank account balance and transactions to ensure you are aware of any potential overdraft situations. This can be easily done through online banking or by setting up mobile alerts.
2. Create a budget and stick to it
By creating a monthly budget and tracking your expenses, you can better manage your finances and avoid overspending. This will help you maintain a positive account balance and reduce the likelihood of incurring overdraft fees.
3. Set up auto-transfer or overdraft protection
Consider setting up automatic transfers from savings to checking to cover any potential overdrafts. Alternatively, you can also inquire about overdraft protection options offered by your bank. These services can help prevent overdrafts and the associated interest charges.
4. Be aware of your bank’s overdraft policies
Each bank in Canada has its own overdraft policies and fee structures. Familiarize yourself with these terms and understand the consequences of using overdraft facilities. This will allow you to make informed decisions and take appropriate actions to avoid or minimize overdraft interest.
By implementing these tips, you can better manage your finances and reduce the impact of overdraft interest charges in Canada. Remember to always assess your financial situation and make adjustments as necessary to stay in control of your funds.
Setting Up Alerts and Notifications
With our calculator, you can easily determine the amount of interest you will be charged for your overdraft in Canada. However, it’s also important to stay informed about the status of your account to avoid unexpected fees and charges. Setting up alerts and notifications can help you manage your finances more effectively.
Types of Alerts and Notifications
There are several types of alerts and notifications that you can set up for your overdraft account:
| Type | Description |
|---|---|
| Balance Alerts | Receive an alert when your account balance falls below a certain threshold. This can help you avoid overdrawing your account and incurring additional fees. |
| Transaction Alerts | Get notified when specific transactions occur on your account, such as deposits, withdrawals, or overdraft transfers. This can help you keep track of your financial activity and detect any unauthorized transactions. |
| Payment Reminders | Set up reminders for upcoming payments, such as loan repayments or credit card bills. This can help you avoid late fees and penalties. |
How to Set Up Alerts and Notifications
Setting up alerts and notifications for your overdraft account is usually a simple process. You can typically do it through your online banking portal or mobile app. Here’s a general guide:
- Login to your online banking or mobile app.
- Navigate to the Alerts or Notifications section.
- Select the type of alert you want to set up (e.g., balance alert, transaction alert).
- Specify the conditions for the alert (e.g., balance threshold, transaction type).
- Choose how you want to receive the alerts (e.g., email, SMS, in-app notification).
- Save your preferences and confirm the setup.
It’s important to review and update your alert preferences regularly to ensure they align with your financial goals and needs. Be proactive in monitoring your account and take advantage of the alerts and notifications available to you.
Regularly Monitoring your Account
When it comes to managing your finances, it’s essential to keep a close eye on your account activity. This is especially true if you have an overdraft in Canada. By regularly monitoring your account, you can stay aware of any fees, charges, and interest related to your overdraft.
Why is monitoring important?
Monitoring your account allows you to be proactive in managing your finances. By regularly checking your account balance, you can ensure that you have enough funds to cover any overdraft and avoid costly fees. It also allows you to track your spending habits and identify areas where you can cut back.
How to monitor your account
There are multiple ways to monitor your account, including:
- Online banking: Most banks in Canada offer online banking platforms where you can view your account activity, check your balance, and set up alerts for overdraft fees or low balances.
- Mobile banking: With the rise of smartphones, many Canadians prefer to monitor their accounts through mobile banking apps. These apps provide the same functionality as online banking platforms.
- ATM receipts: Every time you make a transaction at an ATM, you receive a receipt that shows your account balance. Keep these receipts and compare them to your online or mobile banking statements.
Benefits of using the overdraft calculator
An overdraft calculator can be a valuable tool in monitoring your account. By entering your balance, interest rate, and time period, the calculator can estimate the amount of interest you will be charged for the overdraft. This allows you to plan your finances accordingly and avoid unexpected surprises.
Remember, regularly monitoring your account is crucial for maintaining control over your finances and avoiding unnecessary fees. Use tools like the overdraft calculator to stay informed and make smart financial decisions.
Question-Answer:
How do I calculate my overdraft interest in Canada?
You can calculate your overdraft interest in Canada by using our calculator. Simply input the necessary information such as your overdraft limit, interest rate, and the number of days you have been overdrawn. The calculator will then provide you with the total interest amount you owe.
What is an overdraft limit?
An overdraft limit is the maximum amount of money that you are allowed to overdraw from your bank account. This limit is determined by your bank and is usually based on factors such as your credit history and income. It is important to stay within this limit to avoid any additional fees or penalties.
How is overdraft interest calculated in Canada?
In Canada, overdraft interest is typically calculated using a daily interest rate. This rate is applied to the amount that you are overdrawn each day. To calculate the interest, multiply the daily interest rate by the number of days you have been overdrawn and then by the amount you are overdrawn. This will give you the total interest amount.
What happens if I exceed my overdraft limit?
If you exceed your overdraft limit in Canada, you may be charged additional fees or penalties by your bank. These fees can vary depending on the bank and the terms of your account agreement. It is important to monitor your account balance and stay within your overdraft limit to avoid these extra charges.
Is there a calculator available to calculate overdraft interest in Canada?
Yes, our website provides a calculator specifically designed to calculate overdraft interest in Canada. You can input your overdraft limit, interest rate, and the number of days you have been overdrawn, and the calculator will give you the total interest amount you owe. This can help you estimate and plan for your expenses.
How does the overdraft interest calculator work?
The overdraft interest calculator works by taking into account the amount of your overdraft, the interest rate charged by your bank, and the duration of your overdraft. It then calculates the amount of interest you will be charged based on these variables.