Yes, you can overdraft your checking account, but only if your bank allows it
An overdraft happens when you spend more money than you have in your account. If your bank permits overdrafts, the transaction goes through anyway — your account balance goes negative. If your bank does not permit overdrafts, the transaction is declined at the point of sale or ATM.
Whether your bank allows overdrafts is not your choice alone. Your bank decides this based on your account type and history with them. Some banks offer overdraft protection as a standard feature. Others require you to request it. Still others do not offer it at all, no matter what you ask.
The cost of overdrafting varies widely. Most banks charge an overdraft fee — typically $25 to $35 per transaction — each time you go negative. Some banks charge a daily fee if your account stays negative. A few banks do not charge fees at all, though this is uncommon.
Key Takeaways
- Your bank decides whether overdrafts are allowed on your account; you cannot force them to permit it.
- Each overdraft transaction usually costs $25 to $35 in fees, and multiple transactions in one day can result in multiple fees.
- You can ask your bank to turn off overdraft protection, which will decline transactions instead of charging you fees.
- Overdraft fees are separate from the money you owe back; you must repay the negative balance plus the fee.
- Some banks offer overdraft protection linked to a savings account or credit card, which costs less than overdraft fees.
How overdrafts work at different types of merchants
Overdrafts behave differently depending on where you spend the money. At a grocery store or gas pump, the transaction happens when ready. If you do not have enough money, the bank either declines it or allows it and charges you a fee. You find out right away.
Online purchases and bill payments work differently. The money does not leave your account when ready. Instead, the merchant or biller submits the charge to your bank later — sometimes hours later, sometimes days later. You might not realize you have overdrafted until you check your account or see a fee notification.
Checks are the slowest. When you write a check, the money does not move until the person who receives it deposits it. That can take days or weeks. You might think you have money in your account when you actually do not, because a check you wrote is still floating around.
What happens to the money you owe back
When you overdraft, you owe two separate things: the money you spent and the overdraft fee. The fee is not a loan — it is a charge for going negative. You cannot pay just the fee and leave the negative balance.
Your bank will not automatically take money from another account to cover the overdraft. You have to deposit money yourself to bring your balance back to zero or above. Until you do, your account stays negative and you may be charged additional daily fees.
If you do not repay the overdraft within a certain time — usually 30 to 60 days, depending on your bank — the bank may close your account and report you to ChexSystems, a banking history database. This can make it harder to open a checking account at another bank later.
The difference between overdraft fees and overdraft protection
Overdraft fees are charges your bank levies when you go negative. Overdraft protection is a service that prevents you from going negative in the first place — or at least reduces the cost when you do.
The most common form of overdraft protection links your checking account to a savings account at the same bank. If you overdraft, the bank automatically transfers money from savings to checking to cover it. You pay a small transfer fee — usually $5 to $10 — instead of a $25 to $35 overdraft fee. You still have to repay the money you transferred, but the fee is lower.
Some banks offer overdraft protection linked to a credit card instead. If you overdraft, the bank treats it like a cash advance on the card. You pay credit card interest rather than an overdraft fee, which can be cheaper or more expensive depending on your card's rate.
A few banks offer overdraft protection that straightforward declines transactions instead of charging fees. This means you cannot spend money you do not have, but you also cannot accidentally rack up hundreds of dollars in fees in a single day.
How to turn off overdraft protection if you have it
If your bank allows overdrafts and you do not want them, you can request that overdraft protection be turned off. Call your bank's customer service line or visit a branch in person. Ask to disable overdraft protection on your checking account.
Once it is off, transactions that would overdraft your account will be declined instead. You will not be able to spend money you do not have, and you will not be charged overdraft fees. The trade-off is that your debit card or check might not work when you need it.
Some banks make overdraft protection the default and require you to opt out in writing. If your bank does this, keep a copy of your request. If you are later charged an overdraft fee and claim you disabled protection, you will need proof.
Why banks charge overdraft fees
Banks charge overdraft fees because they are lending you money — even if only for a few hours. When your account goes negative, the bank is covering the transaction with its own money until you repay it. The fee is compensation for that risk and the cost of processing the negative balance.
Overdraft fees are also a source of revenue for banks. Some banks rely heavily on overdraft fees, particularly from customers who overdraft repeatedly. This is why some consumer advocates argue that overdraft fees disproportionately affect people living paycheck to paycheck.
In recent years, some banks have reduced or eliminated overdraft fees in response to criticism. A few banks now offer overdraft protection for free, or charge fees only after a certain number of overdrafts per month. If overdraft fees concern you, it is worth comparing banks before opening an account.
What to do if you overdraft by accident
If you overdraft and are charged a fee, contact your bank when ready. Explain what happened. Some banks will reverse one overdraft fee per year if you ask, particularly if you have been a customer for a long time or if the overdraft was caused by a bank error.
Do not expect the bank to reverse the fee automatically. You have to request it. Be polite and specific: explain when the overdraft happened, why it happened, and ask if the fee can be waived. The worst they can say is no.
If you overdraft repeatedly, the bank is less likely to reverse fees. Instead, focus on preventing future overdrafts. Set up a low-balance alert on your account so you get a text or email when your balance drops below a certain amount. Link a savings account for overdraft protection. Or switch to a bank that does not charge overdraft fees.
Banks that do not charge overdraft fees
A growing number of banks and credit unions do not charge overdraft fees at all. Instead, they decline transactions that would overdraft your account, or they charge a much smaller fee — $5 or less — only after multiple overdrafts in a month.
Online banks tend to have lower or no overdraft fees because they have lower operating costs than brick-and-mortar banks. Credit unions, which are member-owned rather than profit-driven, often have more lenient overdraft policies.
If you are opening a new checking account, ask about overdraft fees before you sign up. The difference between a bank that charges $35 per overdraft and one that charges nothing can save you hundreds of dollars over time.
Frequently Asked Questions
Can I overdraft my account multiple times in one day?
Yes. Each transaction that overdrafts your account is charged separately, so if you make five purchases that overdraft you, you could be charged five overdraft fees — $125 to $175 depending on your bank. Some banks cap the number of overdraft fees per day, but not all.
What is the difference between an overdraft and a returned check?
An overdraft means the transaction went through and your account went negative. A returned check means the check was rejected because you did not have enough money. The bank charges a fee either way, but an overdraft fee is usually higher than a returned check fee.
If I overdraft, can the bank take money from my savings account without asking?
Only if you have overdraft protection linked to savings. If you do not have that service set up, the bank cannot transfer money from savings to checking on its own. You have to do it manually or request it.
How long do I have to repay an overdraft?
This varies by bank, but most banks expect repayment within 30 to 60 days. If you do not repay within that time, the bank may close your account and report the debt to a collection agency or banking database.
Will an overdraft hurt my credit score?
An overdraft itself does not appear on your credit report. However, if the overdraft goes unpaid for a long time and is sent to collections, it can damage your credit. Additionally, some banks report unpaid overdrafts to ChexSystems, which can affect your ability to open accounts at other banks.