What Is an Overdraft Fee? How To Avoid One

Overdraft fees get charged if you withdraw or make a transaction on your account without enough balance to clear that amount. The bank will cover the funds for you, but may charge fees for doing so — around $34 to $37 — and that's when you might get hit with an overdraft fee.

Key Takeaways

• Overdraft fees are bank charges applied when a transaction exceeds your available checking balance — most major banks charge $34 to $36 each time, and many cap charges at three or four per day, so costs can add up quickly if your balance stays negative.

• A single phone call can often get a fee reversed: Call your bank's customer service, explain the situation and ask for a one-time courtesy waiver, which banks commonly offer to customers with a clean account history — especially if it's your first one.

• Overdraft protection can reduce your costs by automatically transferring funds from a linked savings account or line of credit to cover a shortfall before a full overdraft fee kicks in, though a small transfer fee may still apply.

• Setting up low-balance alerts and keeping a buffer of $100 to $200 in your checking account are two of the easiest ways to catch a dwindling balance before it hits zero.

• Not paying back an overdrawn balance can have lasting consequences, including having the account closed, a ChexSystems report and even have your debt sent to collections. It's worth it to correct a negative balance as soon as possible.

Summary generated by AI, verified by MoneyLion editors

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When Does an Overdraft Fee Happen? How It Works

An overdraft happens when you make a purchase or withdrawal that exceeds the available balance in your checking account. Essentially, it means you've spent more money than you have.

When your bank allows the overdraft to happen, they'll charge you an overdraft fee for the favor. It's like they're saying, “We’ll cover this, but it’s going to cost you.”

Say you have $20 in your checking account and try to pay for a $25 meal. Instead of declining your card and leaving you to awkwardly explain yourself to the waiter, the bank approves the transaction but then slaps you with an overdraft fee – often around $35. So, your total cost for that $25 meal becomes $60.

• Returned check fees: If you write a check for more than what you have in your account, it can bounce, leading to a NSF (Non-Sufficient Funds) fee and an overdraft fee.

• Overdraft protection: Some people opt-in to overdraft protection, which allows the bank to cover insufficient funds for a fee. This prevents declined transactions, but at a cost.

• Deposited items returned or cash items returned: If you deposit a check that bounces, your bank may return the deposit. If this causes your balance to dip below zero, you could face an overdraft fee.

• Stop payment fee: If you request a stop payment on a check or transaction and it still goes through, it could overdraw your account, resulting in an overdraft fee.

How Much Do Overdraft Fees Cost?

Most major banks charge overdraft fees. You can see below how much the fees range. The bank can also include daily unpaid fees and maximum daily limits in the charge.

Here’s a snapshot of what different banks charge for overdraft fees as of May 2026:

How To Waive Overdraft Fees

You can get your overdraft fees refunded with the right steps. You might need a bit of patience and some good negotiating skills, but it’s often worth it. Here's how:

1. Call Your Bank

A simple phone call can go a long way. Contact your bank’s customer service, explain what happened, and ask if they’d consider waiving the fee as a one-time courtesy. Banks tend to be accommodating, especially if it’s your first overdraft. For example, if you accidentally bought a $20 book that put your balance into the red, calling your bank promptly to explain could reverse the fee.

2. Transfer the Funds 

Some banks offer a grace period during which you can deposit funds to cover the overdrawn balance and potentially avoid the fee. If you notice that you’ve gone negative, immediately transfer funds from another account. This might involve transferring from a savings account or another checking account. By doing this promptly, the bank may waive the fee since you’ve resolved the issue quickly.

3. Dispute the Charge

If the overdraft fee occurred due to a mistake – like a merchant charging you incorrectly – dispute it with your bank. For instance, if a subscription service accidentally double-charged you and this caused an overdraft, let your bank know. Providing evidence of the mistake (like receipts or screenshots) can help you get that fee refunded.

4. Try an App

Various financial apps, like Chime^®, can help you negotiate bank fees, including overdraft fees. These apps often use AI to monitor your accounts and automatically dispute fees on your behalf, saving you the trouble of calling the bank yourself.

How To Avoid Overdraft Fees

Avoiding overdraft fees is the best strategy – prevention is better than cure. Here’s how to steer clear of overdraft charges altogether:

Monitor Account Balance Regularly

Keeping a close eye on your account balance will help you avoid spending more than you have. For instance, make it a habit to check your balance every morning or before making significant purchases. If you see your balance is low, you’ll know to hold off on nonessential spending.

Set up Low-Balance Alerts

Setting up low-balance alerts is an easy way to stay informed. Most banks offer this feature through their apps, allowing you to receive notifications when your account balance drops below a certain threshold. For example, if you set your alert for $50, you’ll get a heads-up when your balance hits that level, giving you time to deposit more funds before an overdraft occurs.

Link a Savings Account for Overdraft Protection

Consider linking your savings account to your checking account for overdraft protection. If your checking balance runs low, funds are automatically transferred from savings to cover the shortfall. It might still involve a small transfer fee but is often much cheaper than a full-blown overdraft fee. 

Maintain a Cushion in the Checking Account

Keeping a buffer in your checking account – say $100 or $200 – can provide a safety net for accidental overspending. Think of it as your “do not touch” money that is only there to prevent overdrafts. For example, if your balance drops below $50, you know it’s time to add funds to avoid dipping into your cushion.

Switch to a Bank That Offers Zero Overdraft Fees

Some banks, or fintechs, like Chime or Capital One 360, offer accounts with no overdraft fees. These accounts might either automatically decline transactions that would cause an overdraft or offer an alternative like small overdraft coverage with no fees attached. If overdrafts are recurring, switching banks could be the simplest solution.

Use a Prepaid Debit Card

A prepaid debit card is another way to avoid overdraft fees entirely. You can only spend the amount loaded onto the prepaid card, meaning there’s no risk of overdrawing. This approach works well for those who want to stick to a strict budget or are prone to overspending.

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What Happens if You Don’t Pay an Overdraft?

The consequences can add up quickly if you don’t pay back an overdraft.

• The bank may continue to charge you daily fees for the unpaid overdraft balance, eventually closing your account if the negative balance isn't resolved.

• Not paying can damage your credit score and make it harder to open new bank accounts in the future.

• You may face debt collection efforts for the amount owed.

The Bottom Line: Stay Ahead of Overdraft Fees

Overdraft fees can be costly, but understanding how they work, how to get them waived and how to avoid them can save you a lot of money and stress. From calling your bank to dispute fees to setting up overdraft protection or switching to a fee-free account, there are plenty of ways to prevent overdraft headaches. Be proactive and keep your hard-earned money where it belongs – securely in your account.

FAQ

Is an overdraft a loan?

No, an overdraft isn't considered a loan because it is a direct agreement between a bank and a customer that allows them to withdraw more money than they currently have in their account, up to a specified limit.

Are fees charged for every overdraft I make?

Yes, banks typically charge an overdraft fee for every overdraft transaction, up to a certain daily limit depending on the bank's policies.

What is an example of an overdraft fee?

An example of an overdraft fee is being charged $35 by your bank for buying a $10 lunch when you only have $5 left in your checking account.

What's the difference between an overdraft fee and an NSF fee?

An overdraft fee is a fee that a bank charges for covering a transaction where you don't have enough balance in your account. An NSF fee is charged when your bank declines a transaction.

What happens if you accidentally overdraft?

If you accidentally overdraft, the bank will often cover the payment but charge you an overdraft fee. You should deposit funds as soon as possible to bring your balance positive.

Which bank has no overdraft fees?

Bank accounts like Chime and Capital One 360 offer checking accounts with no overdraft fees, providing a more consumer-friendly banking experience.

Key Terms

• Overdraft fee: A charge your bank applies when it approves a transaction — such as a debit card purchase, check or automatic payment — that exceeds your available checking account balance.

• Overdraft protection: A bank service that links your checking account to a savings account, line of credit or credit card to automatically cover a shortfall and help prevent a transaction from being declined or triggering a standard overdraft fee.

• NSF fee: A non-sufficient funds fee charged when your bank declines a transaction because your balance is too low — similar in cost to an overdraft fee, but the payment doesn't go through.

• Overdraft coverage: A bank approves a transaction even if it exceeds your available balance, though may charge a fee each time it occurs. You can typically opt out to have those transactions declined instead.

• ChexSystems: A consumer reporting agency that tracks banking history, including overdrafts and account closures; banks often review it when you apply to open a new account, and it's separate from your credit report.

• Grace period: A short window — typically one business day — during which you can deposit or transfer funds to bring your account back to a positive balance and potentially avoid an overdraft fee.

• One-time courtesy waiver: A refund on an overdraft fee that many banks offer customers with a clean account history who request it, most commonly available once per year.

• Prepaid debit card: A payment card loaded with a fixed amount of money that can only be spent up to the loaded balance, eliminating the risk of overdrafting.

Sources:

• CFPB: What Is Overdraft Protection?

• FDIC: Consumer Resource Center

• Federal Reserve: Protecting Yourself From Overdraft Fees

Summary generated by AI, verified by MoneyLion editors