While APR is the standard for loans and credit cards, the Effective Annual Rate (EAR) is the standard for overdrafts and savings.
EAR vs APR
EAR takes into account the compounding of interest, but unlike APR, it does not include any mandatory fees. It is a pure measure of the interest cost.
Why It Matters for Overdrafts
If your bank charges a 39.9% EAR on your overdraft, the actual cost will depend on how many days you are overdrawn. Because it compounds, staying in your overdraft long-term becomes exponentially more expensive.