How much is an overdraft fee?

Young woman going over her bills in her sunlit kitchen, wondering how much an overdraft fee is.Image: Young woman going over her bills in her sunlit kitchen, wondering how much an overdraft fee is.

In a Nutshell

While some banks have eliminated or reduced overdraft fees, these charges can still average $30 to $35 at banks that do impose them. Overdraft-related fees can quickly spiral out of control when you face them.
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If you overdraw your checking account, your bank may charge you an overdraft fee, typically between $30 and $35.

While some financial institutions have eliminated or reduced overdraft fees, these relatively small charges can quickly jump to hundreds of dollars and become a financial nightmare.

How overdraft fees work can be confusing. We’ll break it down by looking at the type of withdrawal you’re using.

Anytime you overdraft your account with a check or ACH withdrawal, you could be charged a fee, even if you opt in to overdraft coverage.

Overdraft charges on ATM transactions and debit card purchases work a little differently. If you opt out of your bank’s overdraft coverage policy, certain transactions may be declined by your bank if you don’t have enough money in your account. But if you opt in to overdraft coverage, those transactions will go through, and you could end up with a negative bank account balance and an overdraft fee on top of it.

Understanding the cost of overdraft fees, along with how they work and how related charges can add up can help you avoid them completely.

How much is an overdraft fee?

While bank overdraft fees generally range from $30 to $35, your bank’s fee schedule or deposit account agreement should spell out exactly how much your overdraft fees could be. The schedule should include the following information:

  • When you’ll be charged — Some banks won’t charge overdraft fees unless you overdraft by a certain amount.
  • How many times you’re charged — You could be charged an overdraft fee each time you make a withdrawal.
  • A grace period to avoid charges — Overdraft fees might be avoided if you bring your balance up to cover the charge by a certain time.
  • If you’re charged at all — Your bank may not necessarily charge overdraft fees and related charges.

Overdraft protection fees

Some banks offer overdraft protection that lets you link other checking, savings or money market accounts, so if you overdraft your account, the bank will automatically transfer enough money to cover the negative balance, keeping you out of the red.

While some banks offer this service for free, others charge a transaction fee each time they do this for you, though it’s generally cheaper than an actual overdraft fee.

Extended overdraft fees

If you overdraw your account, your bank may expect you to deposit enough money to bring it back above $0 as soon as you can. If you don’t, some banks may even charge extended overdraft fees for not bringing your balance current fast enough.

How nonsufficient funds fees factor in

Banks are allowed to charge you overdraft fees for checks or ACH withdrawals that overdraft your account whether you agree to it or not. But some banks offer you the ability to decline this, so that if any checks or ACH withdrawals come through for more than your current balance, they’ll be declined just as if you’d opted out of overdraft coverage for debit card and ATM withdrawals.

But even this isn’t a failsafe approach. If your bank allows you to opt out for check or ACH withdrawal coverage, you’ll generally still be charged nonsufficient funds fees, which are typically the same amount as overdraft fees anyway.

And if it’s a check that’s declined, you may also have to pay a returned check fee or returned item fee from the merchant, too.

How to avoid overdraft fees

Facing mounting costs from your bank can be stressful, but there are ways to avoid overdraft fees.

  • Ask your bank to drop your overdraft coverage. Without it, you may have purchases declined if you don’t have enough money in your account. But you won’t be paying overdraft fees.
  • Your bank and many popular money tracking apps may allow you to set alerts so you know when you’re in danger of overdrawing your account.
  • There’s a movement afoot at many banks to eliminate overdraft fees entirely. A fee-free account may be right for you.
  • If you only overdraft your account occasionally, a linked account can help you to cover shortfalls by transferring funds from your savings account to your checking account to cover the difference.
  • You might be able to save on overdraft fees by calling your bank and asking it to waive them, especially if you haven’t had a lot of fees in the past. If your bank can’t waive specific fees, ask if there’s a different type of account that doesn’t have fees for the services you need.

What’s next?

Overdraft fees can add up fast. If you tend to overdraft a lot, learning how to budget or exploring ways to avoid overdraft fees may help.

You could also decide if a no-fee checking account is right for you or consider a checking account at a financial institution that doesn’t charge overdraft fees.

About the author: Lindsay VanSomeren is a freelance writer living in Kirkland, Washington. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. She writes for websites such a… Read more.