What is a non-utilisation fee?

A non-utilisation fee is what a lender charges you for the part of your limit you have not used. You will see it on revolving credit facilities and on some other committed facilities.

It exists because the lender has to reserve the full limit against its own funding, whether you draw it or not. The fee pays for holding that money ready.

Typical rates are 0.5% to 1.5% a year on the undrawn balance. It is sometimes called a commitment fee or a non-utilisation charge.

What it actually costs

If you have a £100,000 facility and you have drawn £30,000, the fee applies to the remaining £70,000. At 1% a year, that is £700 over twelve months, charged on the days the balance sits undrawn.

The catch is that it works against the main appeal of a revolving facility. The point of an RCF is that unused headroom is free. A non-utilisation fee means it is not quite free.

What to do about it

Not all lenders charge one. It is worth asking directly, because it is easy to miss in a term sheet.

Size the limit to what you will actually use. Agreeing a larger limit “just in case” costs real money if a non-utilisation fee applies. A £250,000 limit you rarely touch can be more expensive than a £100,000 limit you use properly.

Compare the all-in cost, not the headline rate. A facility with a lower interest rate and a non-utilisation fee can work out dearer than one with a slightly higher rate and none, depending on how much of the limit you typically draw.

When we compare facilities we set out the interest rate, the arrangement fee and any non-utilisation fee together, so you are comparing the total cost rather than the advertised rate.