The basics: what an overdraft is and how it starts
An overdraft happens when you spend more money than you have in your checking account. Your bank lets the transaction go through anyway — but then charges you a fee, usually between $25 and $35 per overdraft. If multiple transactions happen on the same day, you can be charged multiple times.
This is different from a declined transaction. When you don't have enough money, your bank has two choices: refuse the purchase (your card gets declined at the register), or allow it and charge you an overdraft fee. Most banks do the second one by default, which is why overdraft fees exist at all.
The fee itself is not the only cost. If your account stays negative, some banks charge a daily fee for each day your balance is below zero — sometimes called a "negative balance fee" or "extended overdraft fee." These can add up quickly.
Key Takeaways
- Overdraft fees are charged when your bank lets a transaction go through even though you don't have enough money, and these fees typically range from $25 to $35 per transaction.
- You can be charged multiple overdraft fees in a single day if several transactions post while your account is negative.
- Some banks charge additional daily fees if your account stays overdrawn, which can cost more than the initial overdraft fee itself.
- You can ask your bank to turn off overdraft protection, which will decline transactions instead of charging you a fee.
- If you overdraw repeatedly, your bank may close your account or report you to a checking account database that makes opening accounts elsewhere harder.
How overdraft fees stack up in a single day
Banks process transactions in a specific order, and this order matters. Most banks clear larger transactions before smaller ones, even if the smaller ones happened first. This means if you have $50 in your account and you buy coffee for $5, then gas for $40, then groceries for $60, the bank might process the $60 first. Now you're overdrawn by $10, and you get charged a fee. Then the $40 goes through — another overdraft, another fee. Then the $5 goes through — a third fee.
You can end up paying $75 in overdraft fees on $105 in spending. This is called "overdraft stacking," and it's one of the fastest ways to dig yourself into a hole.
Some banks have started limiting overdraft fees to one per day, or capping the total number of fees you can be charged. But not all banks do this, so it's worth asking your bank what their policy is if you're worried about this.
What happens to your account balance after an overdraft
Your account balance goes negative. If you had $50 and spent $60, your balance is now -$10. If the bank charged a $30 overdraft fee, your balance is now -$40. You owe the bank $40 before your account is back to zero.
If you deposit money, it goes toward paying back what you owe first. If you deposit $50, your balance becomes $10 (the $50 minus the $40 you owed). You can then spend that $10, but you're starting from a hole.
If your account stays negative for a long time — usually 30 days or more — the bank may charge you an additional daily fee. Some banks also charge a fee if your account is still negative after 60 days. These fees keep adding up until you bring your balance back to zero or above.
When your bank closes your account
If you overdraw repeatedly or let your account stay negative for months, your bank can close your account without warning. They don't have to give you a reason, and they can do it even if you eventually pay back what you owe.
When a bank closes your account, they report it to ChexSystems or Early Warning Services — these are databases that other banks check when you try to open a new account. If you're in one of these databases, many banks will refuse to open a checking account for you, even years later. Some banks specialize in second-chance accounts for people with ChexSystems records, but these accounts often have higher fees and lower spending limits.
The best way to avoid this is to contact your bank as soon as you realize you're overdrawn. Many banks will work with you to set up a payment plan or waive a fee if you ask before they close the account.
How to turn off overdraft protection
Most banks offer overdraft protection, which is the automatic permission to overdraw. You can ask your bank to turn it off. Once you do, transactions will be declined instead of going through and charging you a fee.
To turn off overdraft protection, call your bank's customer service line or visit a branch in person. You may need to ask specifically for "opting out of overdraft protection" or "disabling overdraft coverage." Some banks make this straightforward; others make you sign a form. Either way, it's free and takes a few minutes.
Once overdraft protection is off, your debit card will be declined if you don't have enough money. This is inconvenient in the moment — you can't buy groceries if your card doesn't work — but it prevents you from paying $30 to spend money you don't have.
Overdraft fees versus NSF fees: what's the difference
NSF stands for "non-sufficient funds." An NSF fee is charged when a check or automatic payment bounces because you don't have enough money. An overdraft fee is charged when the bank lets the transaction go through anyway.
The fees are usually the same amount — around $25 to $35 — but they're triggered by different things. A check that bounces costs you an NSF fee. A debit card purchase that goes through costs you an overdraft fee. If you write a check and don't have the money, you get charged an NSF fee. If someone else writes you a check and it bounces, you don't get charged — the person who wrote it does.
Both fees can be waived if you ask your bank quickly, especially if it's your first time or if you've been a customer for a long time. It's always worth calling and asking.
Steps to recover from an overdraft
First, deposit enough money to bring your balance back to zero or above. This stops any additional daily fees from being charged. If you can't deposit the full amount at once, deposit what you can — every dollar helps.
Second, contact your bank and ask if they will waive the overdraft fee. Many banks will do this once per year or once per account lifetime, especially if you've been a customer for a while. The worst they can say is no. Be polite and honest: "I overdrew my account by accident. Can you waive the fee?" works better than demanding it.
Third, turn off overdraft protection so it doesn't happen again. Fourth, set up a low-balance alert on your account if your bank offers one — this sends you a text or email when your balance drops below a certain amount, giving you a chance to deposit money before you overdraw.
Finally, if you're living paycheck to paycheck and overdrafts keep happening, consider switching to a bank that doesn't charge overdraft fees. Some online banks and credit unions have no overdraft fees at all, or they charge much less than traditional banks.
Frequently Asked Questions
Can a bank charge me an overdraft fee if I didn't authorize overdraft protection?
Banks are required to get your permission before charging overdraft fees on debit card purchases and ATM withdrawals. However, overdraft protection for checks and automatic bill payments is usually on by default. If you never said yes to overdraft protection, you may have a case to dispute the fee. Call your bank and ask — they may waive it.
What if I can't pay back the overdraft?
Contact your bank when ready and explain your situation. Some banks will set up a payment plan or freeze additional fees while you pay back what you owe. If you ignore it, the bank will eventually close your account and report you to ChexSystems, which makes opening a new account much harder. It's better to deal with it now.
How long does an overdraft stay on my record?
Overdrafts don't show up on your credit report, so they don't affect your credit score. However, if your bank reports you to ChexSystems, that record can stay for up to five years. You can request your ChexSystems report for free once per year at www.chexsystems.com.
Will overdraft fees affect my credit score?
Overdraft fees themselves don't show up on your credit report. However, if your bank closes your account and reports you to ChexSystems, it becomes much harder to open a new checking account, which can indirectly affect your financial life.
Can I dispute an overdraft fee?
Yes. Call your bank and explain why you think the fee was unfair — you didn't authorize overdraft protection, it was your first overdraft, or the bank processed transactions out of order. Many banks will waive one fee per year if you ask. Put your request in writing if the bank refuses over the phone.