Learn about and compare overdraft fees

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

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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.

What is an overdraft?

When money is withdrawn from a bank account and the account balance dips below zero, this is known as an overdraft. 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.

Overdraft fees

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.

Fees from the major banks are:

Name Product Fee ATM transaction fee Overdraft fee Nonsufficient funds fee Foreign transaction fee
M&T Bank MyChoice Premium Checking
$24.95/month
(can be waived)
$0
$38.50
3%
Get up to $250 if you open a MyChoice Premium M&T checking account by March 2, 2020, and make qualifying direct deposits totaling at least $500 within 90 days of account opening.
BBVA Online Checking
$0
$0
$38
$38
3%
Bank with BBVA and you could earn a total offer value of $250. Offer valid: 2/1/20 - 2/28/20.
Axos Bank Rewards Checking
$0
$0
$0
$0
1%
Earn up to 1.25% APY while enjoying a suite of digital tools for smarter money management.
Axos Bank Essential Checking
$0
$0
$0
$0
No fees. Unlimited domestic ATM fee reimbursements.
Chase Sapphire Checking
$25/month
(can be waived)
$0
$34
$34
0%
Get a $1000 welcome bonus when you join Sapphire Banking by March 06, 2020. Within 45 days of joining, transfer a total of $75,000 or more in qualifying new money or securities to a combination of eligible checking, savings and/or investment accounts (excludes any J.P. Morgan retirement accounts and CDs), and maintain the balance for at least 90 days.
HSBC Advance Checking
$25/month
(can be waived)
$0
$35
$35
3%
Earn 2% cash back on qualifying direct deposits (up to $30 per month and $350 total during the first 12 months) with a new HSBC Advance Checking account. Offer ends March 1, 2020. Conditions apply. Deposit products are offered in the US by HSBC Bank USA, N.A. Member FDIC.

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Tips for avoiding overdrafts

To keep your finances healthy:

  • 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.

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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