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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.
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.
All overdraft fees are not created equal. Here’s how to sort them out:
| Fee type | Average cost | What it’s for |
|---|---|---|
| Overdraft | $34/item | When your bank covers the difference for insufficient funds. |
| Non-sufficient funds | $35/item | When 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/week | When 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. |
To keep your finances healthy, here are four ways you can avoid 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.
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.
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.
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.
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