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Learn about overdraft fees and how to avoid it

Your bank can't charge you a fee for overdraft purchases unless you consented.

You can choose to have your bank cover the balances of any purchases you can’t afford — but it’ll come with hefty fees. Find out about overdraft fees and tips you can use to avoid them.

What is an overdraft?

An overdraft fee is charged by the bank when you withdraw too much money and your account balance dips below zero. It’s essentially a short-term loan from the bank to cover the cost of the purchase.

For example, if you had $5 in your account and you spend $20 on a debit card purchase, your account would be overdrawn by $15.

Types of overdraft fees

All overdraft fees are not created equal. Here’s how to sort them out:

Fee typeAverage costWhat it’s for
Overdraft$34/itemWhen your bank covers the difference for insufficient funds.
Non-sufficient funds$35/itemWhen your bank declines a transaction or rejects a check due to insufficient funds.
Overdraft protection$10/day – though some banks won’t charge for this.When your bank automatically transfers funds from a linked account to cover a transaction you’ve charged.
Extended overdraft$25/weekWhen you leave a negative balance in your account for 5 to 7 days in a row, your bank may charge this on top of the fees you already owe.

Tips for avoiding overdrafts

To keep your finances healthy, here are four ways you can avoid an overdraft fee:

  • Check your balance. Overdraft fees can add up quickly, so stay up-to-date with your finances by checking your balance, setting up push notifications on your banking app when your balance falls below a certain threshold or using an app like Cleo to keep an eye on your balance.
  • Use ATMs with caution. Certain machines will let you withdraw money you don’t have, leading to hefty overdraft fees.
  • Be aware of pending balances. Account balances displayed on ATMs and online may not always be correct. Recent purchases can take time to show up, so factor in any recent pending purchases when deciding what you can spend.
  • Take stock of your spending habits. If you’ve had to deal with several overdrafts, it might be time to sit down and write up a new budget — and practice sticking to it.

Can my bank always charge an overdraft fee?

Your bank can’t legally charge you a fee for point-of-sale purchase or ATM withdrawal overdrafts unless you opted in to overdraft coverage, but they can charge you for checks and automatic bill payments either way.

Can overdraft fees affect my credit history?

No, overdrafting on your bank account should not affect your credit rating. However, if you were to apply for a loan with the same bank in the future, any overdrafts would be displayed in your account records and your bank may query you as to why they occurred.

Compare overdraft-free accounts

Use the table to compare overdraft-free accounts and other common charges from major banks. If more than one account catches your eye, click the “Compare” box next to each one for a unique side-by-side comparison.

Name Product Fee ATM transaction fee Overdraft fee Nonsufficient funds fee Foreign transaction fee
Aspiration Spend & Save Account
$0 per month or $7.99 per month for Aspiration Plus ($5.99 per month if you pay annually)
$0
$0
$0
1%
Deposits are fossil fuel-free and insured by the FDIC. Enjoy a spend and save combo account with unlimited cash back rewards and a $100 bonus when you spend $1,000 in your first 60 days.
Lili
$4.99 for Lili Pro
$0
$0
0%
Freelancers get paid up to two days early and can automatically set aside money for taxes with the Lili digital bank account. Get up to 10 referral rewards, or $1000.
Chime Spending account
$0
$0
$0
0%
Get rid of fees with this financial app offering consumer-friendly accounts. Chime can also help you save easily and access your paycheck faster.
SoFi Money
$0
$0
$0
0%
SoFi Money® is a cash management account that charges no account fees to save, spend, and earn cash back rewards when you spend on brands you love.
Novo
$0
$0
$0
$27
0%
A low-fee online checking account designed for small businesses and startups.
Axos Bank Rewards Checking
$0
$0
$0
$0
1%
Earn up to 1.00% APY while enjoying a suite of digital tools for smarter money management.
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Compare up to 4 providers

Bottom line

Keeping track of your finances and setting up overdraft protection with your bank can help protect you from hefty fees. But if your budget is tight and you’ll likely need overdraft at some point, compare checking accounts and use a bank that offers low fees.

Frequently asked questions

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