Overdraft Fees Explained: What They Cost and How to Avoid Them

Last updated 03/18/2026 by

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Summary:

An overdraft fee is a charge a bank imposes when a transaction exceeds your available checking account balance, and the average fee is $27 per transaction according to Bankrate’s 2025 survey. Three main approaches reduce or eliminate these charges:

Overdraft protection: Links a savings account or credit line to cover shortfalls automatically, often for a lower transfer fee or no fee at all.
No-overdraft-fee accounts: Banks like Capital One, Ally, and Citibank have eliminated overdraft fees entirely on their consumer checking accounts.
Opt-out: Declining overdraft coverage on debit card purchases means transactions are simply declined at the point of sale — no fee charged.

Few banking fees generate as much frustration as overdraft charges. A single $5 coffee can trigger a $27 penalty if your account balance is $1 short.

The mechanics behind overdraft charges — and which banks still impose them — determine whether that $27 hit is avoidable or inevitable.

What Is an Overdraft Fee?

An overdraft fee is a penalty charged when you spend more money than your checking account holds and the bank covers the transaction anyway. The bank temporarily fronts the difference, then charges you a fee for doing so.

The average overdraft fee is $27, according to Bankrate’s 2025 checking account survey. That’s down from $35 historically, but it still means a $4 shortage on a debit card purchase can cost you $31 total.

Banks can charge multiple overdraft fees per day. Some cap it at 3 to 5 per day, while others have no daily limit — meaning a day of small transactions that each overdraw your account could cost $80 to $135 in fees alone.

Read our Overdraft Fee & Protection guide here

How Overdraft Fees Work

Overdraft fees are triggered differently depending on the type of transaction and whether you’ve opted into overdraft coverage.

Debit card purchases and ATM withdrawals: Banks can only charge overdraft fees on these if you’ve explicitly opted in to overdraft coverage under Regulation E. If you haven’t opted in, the transaction is simply declined — no fee.
Checks and ACH payments: These are covered by default under standard overdraft practices. If you write a check that exceeds your balance and the bank pays it, you’re charged an overdraft fee. If the bank bounces it, you’re charged a nonsufficient funds (NSF) fee instead.
Recurring bill payments: Automatic payments for rent, utilities, and subscriptions can overdraw your account even if you’ve opted out of debit card overdraft coverage. These are processed as ACH transactions, not debit card transactions.

The distinction between debit card and ACH transactions is critical. Opting out of overdraft protection only covers debit card and ATM transactions — it does not stop fees from checks, ACH payments, or automatic bill pays.

Pro tip: Check your overdraft opt-in status right now — most banks bury it under “account settings” in the mobile app. If you don’t remember opting in, you probably did during account setup without realizing it.

Overdraft Fees vs. NSF Fees

An overdraft fee and a nonsufficient funds (NSF) fee are not the same charge, even though both are triggered by a negative balance.

Fee Type	What Happens	Average Cost	Transaction Outcome
Overdraft fee	Bank covers the transaction	$27	Payment goes through
NSF fee	Bank rejects the transaction	$19	Payment bounces

With an overdraft, your bill gets paid but you owe the fee plus the negative balance. With an NSF, your bill doesn’t get paid — and you may also face a late payment fee or returned payment fee from the merchant or biller.

The SuperMoney app connects all your savings and checking accounts in one view — so you can spot unusual activity early, track balances across banks, and stay on top of any account that might be approaching inactivity thresholds.

How Much Banks Make from Overdraft Fees

U.S. banks collected approximately $4.9 billion in overdraft fees in 2024, according to the Consumer Federation of America. That figure has declined from a peak of $12.4 billion in 2019 as more banks reduce or eliminate the charge — but it remains a significant revenue source.

The burden falls disproportionately on lower-income account holders. The CFPB found that roughly 9% of accounts generate 80% of all overdraft fees, with the median overdrafted account paying over $200 per year in charges.

That’s why choosing a checking account with no overdraft fees has become one of the most impactful financial decisions for frequent overdrafters.

The CFPB Overdraft Rule: What Happened

In December 2024, the Consumer Financial Protection Bureau finalized a rule capping overdraft fees at $5 for banks with more than $10 billion in assets. The CFPB estimated the cap would save U.S. households up to $5 billion annually — roughly $225 per affected household.

The rule was set to take effect on October 1, 2025. It never did.

On May 9, 2025, President Trump signed a Congressional Review Act resolution that nullified the rule entirely.

The resolution also prohibits the CFPB from issuing a substantially similar rule in the future unless Congress specifically authorizes it.

The practical impact: overdraft fee regulation remains where it was before the rule — governed by Regulation E (which requires opt-in for debit card overdrafts) but with no federal cap on how much banks can charge.

Banks That Have Eliminated or Reduced Overdraft Fees

Despite the regulatory rollback, competitive pressure has pushed many banks to cut overdraft fees voluntarily.

Bank	Overdraft Fee	Policy Details
Capital One	$0	Eliminated overdraft fees entirely across all consumer accounts
Citibank	$0	Eliminated overdraft fees on all consumer checking accounts
Ally Bank	$0	No overdraft fees; offers up to $250 in overdraft coverage
Discover	$0	No overdraft fees on Cashback Debit account
Bank of America	$10	Reduced from $35; no fee on overdrafts under $5
Chase	$34	Waives fee if balance is restored by end of next business day
Wells Fargo	$35	Offers overdraft rewind for direct deposit customers

The trend is clear — online banks and digital-first institutions have largely moved to $0 overdraft fees, while traditional big banks have reduced fees or added grace periods.

How to Avoid Overdraft Fees

These six methods address different overdraft triggers — from debit card purchases to recurring bill payments.

Opt out of overdraft coverage for debit cards. Under Regulation E, your bank must give you the choice. If you opt out, debit card transactions and ATM withdrawals that exceed your balance are simply declined — no fee. Call your bank or update this setting in your mobile app.
Set up low-balance alerts. Most banking apps let you set a push notification when your balance drops below a custom threshold. Set it at $100 or $200 to give yourself time to transfer funds before transactions start bouncing.
Link a savings account for overdraft transfers. Many banks offer overdraft protection that automatically transfers money from a linked savings account when your checking runs low. The transfer fee is usually $0 to $12 — far less than a $27 overdraft charge.
Use direct deposit with early access. Banks that offer early direct deposit release your paycheck one to two days before the official payday. This narrows the window where your balance might be low enough to overdraft.
Switch to a no-overdraft-fee bank. Capital One, Ally, Citibank, and Discover charge $0 for overdrafts on consumer checking accounts. If overdraft fees are a recurring problem, switching banks eliminates the issue entirely. Opening and closing bank accounts is straightforward and won’t affect your credit score.
Keep a buffer in your checking account. Maintaining $200 to $500 above your typical spending level creates a cushion for unexpected charges. Treat this buffer as untouchable — it’s your fee-prevention fund.

Pro tip: If you’re charged an overdraft fee and it’s your first one (or first in a while), call your bank and ask for a reversal. Most banks will waive one overdraft fee per year as a courtesy — but you have to ask. Some banks also waive the fee automatically if you restore your balance to positive within 24 hours.

Overdraft Protection: Is It Worth It?

Overdraft protection links a backup funding source — typically a savings account, credit card, or line of credit — to your checking account. When your checking balance can’t cover a transaction, the bank pulls from the backup source instead of charging an overdraft fee.

The cost depends on the funding source.

Linked savings account: $0 to $12 per transfer. The cheapest option and the one most banks encourage.
Overdraft line of credit: Interest on the borrowed amount (typically 18%–24% APR) but no flat fee. Only makes sense if you repay quickly.
Linked credit card: Treated as a cash advance with immediate interest accrual and no grace period. Usually the most expensive option.

Overdraft protection from a linked savings account is almost always worth enabling. It costs a fraction of a standard overdraft fee and prevents the cascading effect of multiple overdraft charges in a single day.

Pro tip: Never use a credit card as your overdraft backup — the transfer is treated as a cash advance with immediate interest and no grace period, making it more expensive than the overdraft fee itself.

Key takeaways

The average overdraft fee is $27 per transaction, and banks can charge multiple fees per day on separate transactions.
U.S. banks collected approximately $4.9 billion in overdraft fees in 2024, with roughly 9% of accounts generating 80% of all charges.
The CFPB’s $5 overdraft cap was signed into law in December 2024 but nullified by Congress in May 2025 under the Congressional Review Act.
Capital One, Citibank, Ally, and Discover have eliminated overdraft fees entirely on consumer checking accounts.
Opting out of overdraft coverage under Regulation E is the simplest way to avoid debit card overdraft fees — transactions are declined instead of approved and charged.

FAQ

How much is the average overdraft fee?

The average overdraft fee is $27 per transaction, according to Bankrate’s 2025 checking account survey. Fees at individual banks range from $0 (Capital One, Ally, Citibank) to $35 (Wells Fargo).

Can I get an overdraft fee refunded?

Usually, yes — if you ask. Most banks will reverse at least one overdraft fee per year as a courtesy. Call your bank’s customer service line, explain the situation, and request a one-time waiver. Customers with longer account histories and fewer prior overdrafts have higher success rates.

What’s the difference between overdraft and NSF fees?

An overdraft fee is charged when the bank covers a transaction that exceeds your balance. An NSF (nonsufficient funds) fee is charged when the bank rejects the transaction. In both cases you pay a fee, but with NSF the payment also doesn’t go through — which may trigger a separate late fee from the biller.

Does opting out of overdraft protection stop all overdraft fees?

No. Opting out only applies to one-time debit card purchases and ATM withdrawals. Checks, ACH payments, and recurring automatic payments can still overdraw your account and trigger fees even if you’ve opted out.

Which banks don’t charge overdraft fees?

Capital One, Citibank, Ally Bank, and Discover have eliminated overdraft fees entirely on consumer checking accounts. Several other banks — including Bank of America ($10 fee) and Chase (waived within one business day) — have significantly reduced their policies. No-overdraft-fee checking accounts are increasingly common at online banks and digital-first institutions.

Find a checking account with lower fees

Overdraft fees are avoidable — the right account eliminates them entirely. Compare checking accounts to find options with no overdraft fees, built-in overdraft protection, and the features that match how you actually bank.

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