Why Is an Overdraft the Most Expensive Money You Can Borrow?

Three years ago, Maya put a £1,000 car repair on her overdraft. Since then she has paid about £500 in interest, and she still owes the £1,000. How is that possible? We turn a current account into a water tank and follow what happens below zero: how overdraft interest builds up every day, why the APR matters, and why an overdraft, unlike a loan, has no repayment plan and no end date. Then we line up the price of borrowing £1,000 for a year with a mortgage, a personal loan, a credit card and an overdraft, look at the UK's 2020 overdraft reforms and US flat overdraft fees, see what happens when you go past the limit, and why an overdraft feels like your own money. We finish with five general rules for breaking the payday cycle. Maya and her numbers are an invented example. Rates are dated figures from the Bank of England, the FCA, the CFPB and the Federal Reserve. General education, not personal advice. What surprised you most: the daily interest, the APR, or the word 'available' in your banking app? More explanations from Moneriny:    / @moneriny   #Overdraft #PersonalFinance #MoneyExplained