Glossary
Line fee
An annual percentage charged on a facility limit, whether or not the money is drawn.
In plain English
A line fee is charged on the limit of a facility rather than on the balance. A $500,000 overdraft with a 1.5% line fee costs $7,500 a year even if it is never drawn.
It is most common on overdrafts and revolving facilities, where the lender is holding capacity available for you. Interest is charged separately, on what is actually drawn.
Why a lender cares
Line fees are why an unused limit is not free. Where a facility sits undrawn year after year, the honest question is whether the limit is doing anything, because it is quietly costing real money. It also belongs in your annual commitments when capacity is being assessed.
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