Your bank will either decline the transaction or pay it and charge you a fee

When you try to spend more money than you have in your checking account, one of two things happens. Your bank may straightforward refuse the transaction — the card gets declined at the register, or the check bounces. Or your bank may pay the transaction anyway and let your account go negative, then charge you an overdraft fee (usually $25 to $35 per transaction). Some banks charge multiple fees if several transactions post while your account is overdrawn.

Which outcome you get depends on your bank's overdraft policy and whether you have overdraft protection set up. Most banks give you the choice when you open an account, though the default is often to decline transactions rather than charge fees. If you have not seen this choice, your bank's website or your account agreement will tell you which one applies to you.

The key difference: a declined transaction stops the problem before it starts. An overdraft fee lets the problem happen and then charges you for it. Neither is ideal, but they work very differently in practice.

Key Takeaways

  • Your bank will either decline your transaction or pay it and charge you an overdraft fee, depending on your account settings.
  • Overdraft fees typically range from $25 to $35 per transaction, and multiple transactions can trigger multiple fees in a single day.
  • You can change your overdraft settings at any time by contacting your bank or logging into your account online.
  • If you overdraw your account, paying back the negative balance as soon as possible stops additional fees from accumulating.
  • Some banks offer overdraft protection through a linked savings account or credit line, which covers the shortfall without a fee.

How overdraft fees work and how fast they add up

When your bank pays a transaction that would overdraw your account, they charge you a fee for that service. The fee is not a percentage of the amount you overspent — it is a flat charge, usually $25 to $35, regardless of whether you went over by $1 or $100. If you make three purchases while your account is overdrawn, you may be charged three separate fees.

The timing matters. Banks process transactions in different orders, and they often batch them at the end of the day. This means you might make five small purchases, and if they all post at once while your account is negative, you could be charged five overdraft fees in a single day. Some banks have started limiting this — capping overdraft fees at one or two per day — but not all do.

Once your account is overdrawn, the negative balance sits there until you deposit money to cover it. If you do not deposit anything, some banks will eventually close your account and report you to ChexSystems, a checking account history system that makes it harder to open a new account elsewhere.

Declining transactions versus paying with overdraft fees

If your bank is set to decline transactions when you do not have enough money, the transaction straightforward will not go through. Your debit card gets declined, your check bounces, or your online payment fails. This is inconvenient in the moment — you cannot buy groceries or pay a bill — but it costs you nothing.

The downside is that a bounced check or declined payment might trigger its own consequences. If you write a check to pay rent and it bounces, your landlord may charge you a returned-check fee (often $25 to $50) and could start eviction proceedings. If a bill payment declines, you might miss a important date and face a late fee or damage to your credit score.

If your bank is set to pay overdrafts, you avoid the bounced-check problem but pay the overdraft fee instead. You get the money or the payment to go through, but your account goes negative and you owe the bank. This is sometimes the better choice if the alternative is a late payment on something important, but it is not free.

Overdraft protection: linking a savings account or credit line

Some banks offer overdraft protection, which means they will cover a shortfall by pulling money from another account you own — usually a savings account — or from a small credit line. If you set this up and you overdraw your checking account, the bank automatically transfers money from your savings to cover it. You may be charged a small fee (often $5 to $10) or no fee at all, depending on your bank.

This is useful if you have a savings account with money in it and you want to avoid overdraft fees. It is less useful if your savings account is also empty, because then the transfer fails and you are back to a declined transaction or an overdraft fee.

A credit-line overdraft protection works the same way: the bank lends you the money to cover the shortfall, and you pay it back with interest. This is rarer than savings-account protection and usually only available to customers with good credit history.

How to change your overdraft settings

You can change whether your bank declines transactions or charges overdraft fees. Log into your online banking account and look for "overdraft settings," "overdraft protection," or "account preferences." If you cannot find it online, call your bank's customer service line — they can change it for you over the phone in a few minutes.

Most banks let you switch between declining transactions and paying overdrafts. Some also let you set a threshold — for example, "decline transactions if my balance would drop below $50" — so you have a small cushion. A few banks let you opt out of overdraft fees entirely, which means all transactions will be declined if you do not have the money.

If you have had overdraft fees in the past and your account is still negative, ask your bank whether they will reverse some of the fees. Banks sometimes do this as a one-time courtesy, especially if you have been a customer for a while or if the fees were caused by a system error.

What to do if you have overdrawn your account

The first step is to deposit money to bring your account back to zero or above. This stops additional fees from accumulating and prevents your bank from closing your account. Even a small deposit helps — if you are $50 overdrawn and you deposit $30, you still owe $20, but you have stopped the bleeding.

If you cannot deposit money right away, contact your bank and explain the situation. Some banks will work with you on a payment plan, especially if you have been a good customer. Others will not, but it never hurts to ask. Do not ignore the problem — the longer your account stays negative, the more fees you may accumulate and the more likely your bank is to close the account.

If your bank has already closed your account or reported you to ChexSystems, you may need to use a second-chance checking account, which is designed for people with a history of overdrafts or bounced checks. These accounts often have lower limits, higher fees, and fewer features than a standard checking account, but they let you rebuild your banking history.

Preventing overdrafts in the first place

The simplest way to avoid overdrafts is to keep track of your balance and not spend money you do not have. This sounds obvious, but many people do not check their balance regularly or do not account for checks or automatic payments that have not cleared yet.

Set up a small buffer — keep at least $50 or $100 in your account at all times so that small unexpected charges do not push you into the negative. If you use your debit card frequently, check your balance before you swipe. If you have automatic bill payments, make sure you know when they post and that you have enough money to cover them.

Some banks offer low-balance alerts, which send you a text or email when your balance drops below a certain amount. This gives you a warning before you overdraw. If your bank offers this, turn it on.

Frequently Asked Questions

Can my bank charge me multiple overdraft fees in one day?

Yes. If several transactions post while your account is overdrawn, you may be charged a separate fee for each one. Some banks cap this at one or two fees per day, but not all. Check your account agreement or call your bank to find out their policy.

What is the difference between an overdraft fee and a non-sufficient funds fee?

An overdraft fee is charged when your bank pays a transaction even though you do not have enough money. A non-sufficient funds (NSF) fee is charged when a check bounces or a payment is declined because you do not have enough money. The fee amount is usually the same, but NSF fees explore to declined transactions while overdraft fees explore to paid ones.

If I overdraw my account, will it hurt my credit score?

An overdraft alone does not show up on your credit report and will not hurt your credit score. However, if your bank closes your account and reports you to ChexSystems, it becomes harder to open a new checking account. And if you miss a bill payment because of an overdraft, that late payment can hurt your credit.

Can I get overdraft fees reversed?

Some banks will reverse one or two overdraft fees as a courtesy, especially if you have been a customer for a while or if the overdraft was caused by a bank error. Call your bank and ask politely. They are not required to reverse the fees, but it is worth trying.

What happens if I never pay back my overdraft?

Your bank will eventually close your account and may report you to ChexSystems, making it harder to open a new account elsewhere. They may also send your debt to a collection agency. The longer you wait, the worse the consequences become.