# Overdraft Charges

## Do you understand how your bank charges you for taking out an overdraft? Try this self marking quiz.

##### Level 1Level 2Exam-StyleDescriptionHelpMore Finance

The daily overdraft fee charged by a major high street bank is different depending on how much you borrow. It could include up to three different amounts added together. Here's how it works:

 Up to £250 Between £250 and £2000 Over £2000 0% + 16% AER + 12% AER
 1. What is the annual fee for an overdraft of £265? Working: £ 2. What is the annual fee for an overdraft of £1587? Working: £ 3. What is the annual fee for an overdraft of £3538? Working: £ 4. What is the annual fee for an overdraft of £4149? Working: £ 5. The annual fee for an overdraft is £17.12. How much was the overdraft? Working: £ 6. The annual fee for an overdraft is £152.32. How much was the overdraft? Working: £ 7. The annual fee for an overdraft is £363.16. How much was the overdraft? Working: £ 8. Karen works at this bank and gets a 50% discount off all bank charges, What is Karen's annual fee for an overdraft of £3835? Working: £ 9. Balbir had the same overdraft for three years. What is the total of the bank charges that Balbir had to pay over the three years if the amount of the overdraft was £4295? Working: £ 10. A different bank charges 14% AER on all overdrafts. What amount of overdraft would incur the same charges from both banks? Working: £
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 This activity is suitable for students of mathematics all around the world. Use the button below to change the currency symbol used to make it more relevant to your students. You may wish to choose an unfamiliar currency to extend your students' experience.

## Instructions

Try your best to answer the questions above. Type your answers into the boxes provided leaving no spaces. As you work through the exercise regularly click the "check" button. If you have any wrong answers, do your best to do corrections but if there is anything you don't understand, please ask your teacher for help.

When you have got all of the questions correct you may want to print out this page and paste it into your exercise book. If you keep your work in an ePortfolio you could take a screen shot of your answers and paste that into your Maths file.

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Mathematicians are not the people who find Maths easy; they are the people who enjoy how mystifying, puzzling and hard it is. Are you a mathematician?

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Learning and understanding Mathematics, at every level, requires learner engagement. Mathematics is not a spectator sport. Sometimes traditional teaching fails to actively involve students. One way to address the problem is through the use of interactive activities and this web site provides many of those. The Go Maths page is an alphabetical list of free activities designed for students in Secondary/High school.

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## Description of Levels

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Level 1 - Calculating the charges given the size of the overdraft

Level 2 - Problem solving questions about bank overdrafts

Flow Chart Bills - This is a simpler exercise in calculating bills given a flowchart.

Exam Style Questions - A collection of problems in the style of GCSE or IB/A-level exam paper questions (worked solutions are available for Transum subscribers).

More on this topic including lesson Starters, visual aids, investigations and self-marking exercises.

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## Curriculum Reference

See the National Curriculum page for links to related online activities and resources.

Overdrafts are a short-term way to borrow money up to an arranged limit. They are one of the most expensive ways of borrowing money so should be avoided it at all possible.

## Examples

### Level 1

If you borrow £500: £500 at 1p for every full £6 (divide 500 by 6 and round down to the nearest whole number) which is 83p

If you borrow £1,600: First £1,250 at 1p for every full £6 which is £2.08; Plus, £350 at 1p for every full £7 which is £0.50 = Daily fee of £2.58.

If you borrow £3,200: First £1,250 at 1p for every full £6 which is £2.08; Plus, £1,250 at 1p for every full £7 which is £1.78; Plus, £700 at 1p for every full £8 which is £0.87 = Daily fee of £4.73.

If an amount is not a whole number of pounds it should be written with two digits after the decimal point.

This system of calculating overdraft charges was introduced by Lloyds Bank UK on 28 January 2018.

### Level 2

If you borrow £200: There will ne no charge.

If you borrow £1000: The first £250 will be free but the rest, £750 will be charged at the rate of 16%. 750 multiplied by 0.16 = £120.

If you borrow £3000: The first £250 will be free but the next £1750 will be charged at the rate of 16% then the last £1000 will be charged at the rate of 12%. 1750 multiplied by 0.16 + 1000 multiplied by 0.12 = £400.

If an amount is not a whole number of pounds it should be written with two digits after the decimal point.

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