Quick answer
A line fee is a charge a lender applies to the full approved limit of a revolving facility, such as a business overdraft, line of credit or bank bill facility, whether or not you draw the money. It pays the lender for keeping the funds available. It's separate from interest, which is charged only on the amount you actually use, so a large unused limit can still cost real dollars.
Key points
- Charged on the whole limit, not just the drawn balance
- Common on overdrafts, lines of credit, bank bill and trade facilities
- Usually billed monthly or quarterly on top of interest
- An oversized limit you rarely use is often the easiest cost to cut
Plenty of business owners are surprised to find a charge on their overdraft statement in a month when they didn’t touch it. That charge is usually the line fee: the price of having money on standby.
How a line fee works
When a lender approves a revolving facility, it has to set aside capital for the full limit, because you could draw all of it tomorrow. The line fee compensates it for that commitment. It’s typically:
- calculated on the approved limit, not the balance;
- charged monthly or quarterly, separately from interest;
- found on revolving products such as a business overdraft, a business line of credit, a secured line of credit, bank bill facilities and trade finance lines.
Some facilities calculate the charge on the limit or the balance, whichever is higher, which matters if you sometimes go over the limit. In business.gov.au’s glossary, a line of credit lets you withdraw funds up to an agreed ceiling. The line fee is simply what that ceiling costs to keep in place.
Worked example: what an idle limit really costs
A Newcastle building supplies business has a $250k overdraft. Its line fee works out at $750 a quarter, or $3,000 a year. On average it uses about $60k of the limit, and it pays interest on that drawn balance.
| Current setup | Right-sized limit | |
|---|---|---|
| Approved limit | $250k | $120k |
| Average amount drawn | $60k | $60k |
| Yearly line fee | $3,000 | $1,440 |
| Interest on drawn funds | Unchanged | Unchanged |
| Yearly saving | $1,560 |
The business still has double its average usage available for peaks. Cutting the limit didn’t change its interest bill at all, only the cost of the unused headroom. Line fees are worth reviewing every year, alongside the establishment fee and account fees, using a tool like our loan cost comparison calculator.
Line fee vs other charges
| Charge | Based on | When you pay it |
|---|---|---|
| Line fee | Full limit | Every period the facility is open |
| Unused limit fee | Undrawn part of the limit | Every period |
| Interest | Drawn balance | Only on money actually drawn, day by day |
| Establishment fee | One-off | At setup |
The Reserve Bank’s May 2026 review of bank fees found business lending fees were a little over one-third of all bank fee revenue in 2024/25, so they’re far from a rounding error for banks or their customers.
Not sure your facility is the right shape? Have a specialist look at it.
Choosing the right limit
Set the limit to cover your realistic peak, such as a seasonal stock build or the stretch between payroll going out and customers settling invoices, plus a buffer. If you only need a big limit a few times a year, a smaller line plus a short-term loan for peaks, or invoice finance tied to your sales, can be cheaper overall. Our overdraft vs line of credit comparison covers the trade-offs.
Want working capital that fits how you trade?
If your bank has been generous with your limit and fees are reasonable, that facility is worth keeping. If it’s declined an increase, or the costs no longer stack up, we can help you find something that fits. Our short form needs around a minute of your time, and enquiring leaves your credit rating exactly where it is. We don’t share your enquiry with every lender going; one person reviews it and calls you. Be accurate about your typical and peak usage so we can size the facility properly on the first go.
Frequently asked questions
Is a line fee the same as interest?
No. Interest is charged on the money you've drawn. A line fee is charged on the limit itself, so you pay it even when the facility sits at zero.
Can I avoid a line fee?
Some lenders offer facilities with no line fee but charge more in interest or a higher monthly account fee. Reducing your limit to what you genuinely need is the most direct way to shrink the charge.
What's the difference between a line fee and an unused limit fee?
A line fee is calculated on the full limit. An unused limit fee, sometimes called a commitment fee, is charged only on the part you haven't drawn. Check which one your facility uses, as the cost behaves differently.
Is a line fee tax deductible?
Fees on finance used for business purposes are generally deductible, like interest. Confirm the treatment with your accountant, especially if the facility is partly used for private purposes.
Do non-bank lenders charge line fees?
Many do on revolving products, though some describe it differently, for example as a facility fee or monthly limit fee. Ask for the total yearly cost in dollars at your expected usage.