What Is an Overdraft Fee? How to Avoid and Calculate Them

An overdraft fee is a charge your bank or financial institution may apply when a transaction exceeds your available checking account balance. Essentially, the bank covers the difference so your payment goes through – but they charge you a fee for doing so. Overdraft fees can apply to debit card purchases, ATM withdrawals, automatic bill payments, and checks.

Here’s how it works in practice. Say you have $50 in your checking account and you swipe your debit card for a $75 purchase. Your bank may approve the transaction and cover the extra $25 – but then charge you a fee on top of that. So instead of owing just $25, you could owe $25 plus whatever your bank’s overdraft fee¹ happens to be.

The tricky part? Some banks allow multiple overdraft fees in a single day. That means a few small transactions – a coffee run or a streaming subscription – can each trigger a separate fee if your balance is already negative.

Overdraft fees vary from one financial institution to the next, but they can take a real bite out of your budget. According to Bankrate’s 2025 checking account survey, the average overdraft fee sits at $26.77.² Some banks charge significantly more, while others have dropped the fee entirely.

Here’s a look at how overdraft fees compare across some well-known financial institutions.

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As you can see, fees can range from $0 to $35 per transaction. If your bank charges $35 and allows three overdrafts per day, that’s up to $105 in fees from just one rough day – on top of whatever you already owe.

Overdraft fees and nonsufficient funds fees sound similar, but they work differently – and it’s worth knowing the distinction.

An overdraft fee is charged when your bank covers a transaction that exceeds your available balance. Your payment goes through, but you pay a fee for the bank stepping in. A nonsufficient funds fee is charged when your bank declines the transaction entirely. The payment bounces, and you still get hit with a fee – sometimes called a returned item fee.

In some cases, you could face both. For example, if a check bounces, you might get an NSF fee from your bank and a returned check fee from the company you were trying to pay. Chime doesn’t charge overdraft fees or NSF fees, so you can avoid both charges altogether.

Overdraft protection is a service many banks offer to help cover transactions when your checking account doesn’t have enough money. It works by linking your checking account to another account – like a savings account, credit card, or line of credit – so funds can transfer automatically when you’re short.

While overdraft protection can prevent declined transactions and the fees that come with them, it’s not always free. Some banks may charge a transfer fee each time funds are moved from your linked account. Others may charge interest if the funds come from a credit card or line of credit. It’s a good idea to read the fine print so you know exactly what you’re signing up for.

You can usually set up overdraft protection through your bank’s website, mobile app, or by calling customer service. If you’re not sure whether your bank offers it, check with them directly to learn about your options.

The good news? You don’t have to accept overdraft fees as a cost of having a checking account. Here are five practical ways to help keep those charges off your statement.

1. Opt out of overdraft coverage

You may not realize it, but you can opt out of overdraft coverage for one-time debit card purchases and ATM withdrawals. When you opt out, transactions that would overdraw your account are simply declined – no fee attached.

This won’t cover checks or automatic bill payments, but it can prevent surprise fees from everyday purchases. Contact your bank or check your account settings to update your preference.

2. Use overdraft protection

If your bank offers overdraft protection, linking a savings account or another funding source can act as a safety net. When your checking balance runs low, funds transfer automatically to cover the gap.

Just be aware of any transfer fees your bank may charge for this service. Even a small fee is usually much less than a full overdraft charge.

3. Set up low-balance alerts

Most banks and financial institutions let you set up notifications when your balance drops below a certain amount. These alerts can give you a heads-up before a transaction pushes you into the negative.

Set your alert threshold high enough that you have time to react – transferring funds or skipping a non-essential purchase can make the difference. A simple text or push notification could save you from an unexpected fee.

4. Use a fee-free banking service

One of the most straightforward ways to avoid overdraft fees is to use a financial institution that doesn’t charge them.9 Several providers – including Chime – have eliminated overdraft fees altogether.

SpotMe® offers overdraft protection on debit card purchases and cash withdrawals with no fees, starting at $20 and up to $200 or more in overdraft protection. You may be eligible with at least one qualifying direct deposit of two hundred dollars or more per month. It’s a helpful alternative if you’re looking for a fee-free checking account that won’t penalize you for small shortfalls.

5. Cover your overdrawn balance quickly

If your account does go negative, depositing funds as soon as possible can help minimize the damage. Some banks charge extended or daily overdraft fees for every day your balance stays below zero.

The faster you bring your account back to positive, the fewer fees you may face. Even a small deposit can help stop the cycle of compounding charges.

Already been charged an overdraft fee? It’s worth asking your bank to waive or refund it. Many financial institutions may be willing to reverse fees – especially if you don’t make a habit of overdrawing your account.

Here are a few tips that can improve your chances.

• Call your bank directly: Speaking with a representative is usually more effective than sending a message through an app. Be polite, explain the situation, and ask if the fee can be reversed as a one-time courtesy.
• Mention your history: If you’ve been a long-time customer with a good track record, make sure to bring that up. Banks may be more flexible with loyal members.
• Act quickly: The sooner you reach out after the fee is charged, the better. Waiting too long can make it harder to get a reversal.
• Deposit funds first: Bringing your balance back to positive before calling shows good faith and may make the bank more willing to help.
• Ask to speak with a supervisor: If the first representative can’t help, politely ask to escalate. Supervisors often have more authority to approve fee waivers.

There’s no guarantee your bank will say yes, but it never hurts to ask. You might save yourself a meaningful amount – and it only takes a few minutes.

Overdraft fees can chip away at your budget when you least expect it, but you have more control than you might think. Whether it’s opting out of overdraft coverage, setting up alerts, or switching to a financial institution that doesn’t charge these fees – there are real steps you can take to protect your money.

Your finances should work for you, not against you. Taking a few minutes to review your account settings and explore your options can help you build a plan that keeps more money in your pocket.