Overdraft fee

What It Means

An overdraftOverdraftWhen a payment is bigger than your checking balance and the bank pays it anyway, leaving a negative balance you owe back, usually plus a fee. See more fee is the charge your bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more adds when it pays a check, automatic payment or card purchase that your checking accountChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more didn't have the money for. Most banks charge a flat amount per item, so the fee is the same on a $4 coffee as on a $400 bill, and you repay the negative balance on top of it. A nonsufficient funds (NSF) fee is a separate charge some banks apply when they decline or return a payment instead of paying it.

How It Sounds at Home

• "I got hit with two overdraft fees in one day."
• "That coffee ended up costing me forty bucks."
• "Can you call the bank and ask them to waive the fee?"

The Breakdown

Worked example. Priya's bank charges $35 per overdraft, the median the CFPB found at banks and credit unions with more than $1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more billion in assetsAssetsThings you own that are worth money, such as cash, investments, a home or a car. Your assets minus your debts is your net worth. See more that still charged one, in monitoring from December 2022 to August 2023. She overdraws about twice a month, usually on small card purchases.

What the result means. On a small purchase the fee can be many times the price: $35 on a $5 purchase is seven times the purchase itself. Over a year, two overdrafts a month cost Priya $840 in fees alone. Ways to bring that down include not opting in to overdraft coverageOverdraft protectionA bank service that covers a checking shortfall, either by moving money from a linked account or by paying the item and charging an overdraft fee. See more for debit card and ATM transactions, keeping a cushion in checking, and linking a savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more for transfers; the CFPB describes the opt-in choice and linked-account transfers on its overdraft pages.

Good to Know

In December 2024 the CFPB finalized a rule that would have changed how banks and credit unions with more than $10 billion in assets could charge for overdrafts, with a $5 fee as one of the options, starting in October 2025. Congress overturned it under the Congressional Review Act, the President signed the resolution in May 2025 (Public Law 119-10), and the CFPB says the rule has no force or effect, so your bank's own account agreement and fee schedule still set the fee. For ATM withdrawals and one-time debit card purchases, Regulation E (12 CFR 1005.17) means the bank needs your opt-in before it can charge an overdraft fee, and you can revoke it at any time. HelpWithMyBank.gov, run by the OCC, notes that banks don't need an opt-in to charge an NSF fee.

Related Terms and Categories

• Overdraft

  When a payment is bigger than your checking balance and the bank pays it anyway, leaving a negative balance you owe back, usually plus a fee.

• Overdraft protection

  A bank service that covers a checking shortfall, either by moving money from a linked account or by paying the item and charging an overdraft fee.

• Monthly maintenance fee

  A charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions.

• Available balance

  The money in a bank account you can use right now: the posted balance minus pending card purchases and any deposit the bank is still holding.

• Checking account

  A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.

• ATM fee

  A charge for using an ATM, which can come from the machine's owner, from your own bank for using a machine outside its network, or from both.

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