Hailey Johnson
Overdraft fees are charges incurred when an account holder spends more money than is available in their account, but the bank authorizes the transaction anyway. Overdraft fees are typically charged per transaction and can range from $15 to $37, with an average of $27.08 per transaction. While some banks charge multiple overdraft fees in a single day, others set limits on the number of overdraft fees charged per day. Notably, not all banks charge overdraft fees, and some offer accounts with low or no overdraft fees. Account holders can also avoid overdraft fees by opting out of overdraft coverage, which results in transactions being declined if there are insufficient funds.
| Characteristics | Values |
|---|---|
| Overdraft fees charged by banks | Overdraft fees are not charged by all banks, but for those that do, fees vary widely. Overdraft fees typically range from $15 to $37 per transaction, with an average of $27.08, but some banks charge more than $30. |
| Opting in to overdraft coverage | Overdraft coverage is optional, and you can opt-in or opt-out at any time. If you opt-in, your bank may pay for transactions that exceed your account balance, and you will be charged an overdraft fee. |
| Overdraft protection | Overdraft protection is a service that links your checking account to a backup savings account, credit card, or line of credit to prevent overdrafts. Some banks charge a fee for overdraft protection transfers, while others do not. |
| Avoiding overdraft fees | You can avoid overdraft fees by choosing an account with no overdraft fees, maintaining a positive account balance, using budgeting tools, and keeping track of your spending. Some banks offer grace periods to restore your account balance without incurring overdraft fees. |
| NSF fees | NSF (non-sufficient funds) fees are charged when a bank declines a transaction due to insufficient funds. Many large banks have stopped charging NSF fees, but some banks charge around $30-$35 for each occurrence. |
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What You'll Learn
Overdraft protection plans
Overdraft protection transfers allow you to link a savings account, money market account, or a second checking account at the same bank to your main checking account. If you overdraft your checking account, the bank will automatically transfer funds from the linked account to cover the cost of the transaction. Many banks offer this as a free service, but some banks charge a transfer fee.
Overdraft lines of credit are another type of overdraft protection. With this option, you link your checking account to a line of credit or credit card. If you overdraft your checking account, the bank will transfer funds from the line of credit or credit card to cover the transaction. You may have to pay for these transfers, and any advances from a credit account will accrue interest.
Grace periods are another feature of some overdraft protection plans. With a grace period, you may have until the next business day to deposit funds into your account to avoid an overdraft fee.
It's important to note that overdraft protection should not be used regularly as it can be a costly habit. If you overdraw your account, it's important to get money back into your account as soon as possible to cover both the amount of the overdraft and any bank fees. Additionally, standard overdraft services are provided at the bank's discretion and are not guaranteed for all transactions.
When choosing an overdraft protection plan, be sure to ask your bank about the fees and the fee structure for the services they offer. Compare the options to find the plan that best meets your needs and consider the costs of each option.
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Overdraft fees range
Overdraft fees are incurred when a bank account holder spends more money than is available in their account, but the bank authorizes the transaction anyway. Overdraft fees vary widely across different banks and transactions, and some banks do not charge overdraft fees at all. Overdraft fees typically range from $15 to $37 per transaction, with an average of $27.08, according to Bankrate's 2024 checking account survey. Some banks charge more than $30 for overdrafts, and multiple overdraft fees can be incurred in a single day, which can quickly become costly.
Some banks offer a grace period for customers to restore their account balance to $0 by the end of the next business day without incurring overdraft fees. For example, Huntington Bank offers customers a $50 Safety Zone, meaning that overdrafts of $50 or less are not charged an overdraft fee. Additionally, some banks provide accounts with low or no overdraft fees, such as Bank On certified accounts.
It is important to understand how your bank handles overdrafts and to choose an account with no or low overdraft fees to avoid incurring these charges. Overdraft protection programs are also available, which link a checking account to a backup savings account, credit card, or line of credit to prevent overdrafts. However, some banks charge a fee for overdraft protection transfers.
To avoid overdraft fees, it is essential to monitor your account balance and ensure you have enough funds to cover purchases and upcoming payments. Banks often provide tools to help customers keep track of their balance and transactions, such as mobile apps and alerts.
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Fee refund requests
Overdraft fees are typically charged for transactions that result in a negative account balance. While some banks offer overdraft coverage, it is not mandatory to opt into it. If you do opt into overdraft coverage, you will be charged a fee for each transaction that overdraws your account.
If you have been charged an overdraft fee, you may be able to get a refund by requesting one from your bank. Banks value maintaining good relationships with their customers, so they may be willing to refund the fee if you provide a valid reason. However, it is not guaranteed that they will approve your request. When contacting customer service, be prepared to provide as much information as possible, including your account details and the transaction that led to the overdraft fee. If your request is denied, you can escalate the issue by asking to speak with a supervisor.
To avoid overdraft fees in the future, consider setting up low balance alerts through your bank and choosing a bank that does not charge overdraft fees or offers a ''checkless' checking account. Additionally, some banks offer accounts with low fees and no overdraft fees, such as Bank On certified accounts. These accounts may also provide other free services like ATM withdrawals. By comparing different banks and account options, you can find one that meets your specific needs and helps you avoid unnecessary fees.
It is worth noting that some banks have specific overdraft fee forgiveness programs. For example, U.S. Bank offers the Overdraft Fee Forgiven program, which provides customers with alerts and a grace period to bring their account balance back to at least $0. Huntington Bank also has a similar program called 24-Hour Grace, which gives customers more time to fix overdrafts and avoid fees.
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Banks without overdraft fees
Banks typically charge overdraft fees for transactions that result in a negative account balance. However, there are a number of banks that have cut or eliminated overdraft fees. Here are some examples:
Capital One
In early 2022, Capital One became the first large bank to eliminate all overdraft fees and non-sufficient fund fees. Eligible 360 Checking accounts now offer free overdraft protection, with transactions either declined or covered via automatic transfers from a linked savings account, both without fees. Capital One 360 Checking also has no monthly maintenance fees, minimum deposit, or balance requirements.
Chase
Chase Secure Banking is a checking account with no overdraft fees and no fees on most everyday transactions. While you could still end up with a negative balance, Chase will not charge an overdraft fee. Chase Total Checking also offers early direct deposit, allowing customers to access their direct deposit payroll funds up to two days early.
Citibank
In June 2022, Citibank eliminated fees associated with overdrafts, overdraft protection, NSF, and returned items. Citibank offers overdraft protection without fees, with linked savings accounts or Citi lines of credit automatically transferring funds to checking accounts when negative balances occur.
Discover Bank
Discover Bank does not charge for its overdraft protection. Money is taken from your Discover savings account to cover an overdraft, and there are no monthly maintenance fees or minimum deposit or balance requirements.
Betterment Checking
Betterment Checking is an online-only account with no overdraft fees or account minimum requirements. Betterment also reimburses all out-of-network ATM fees worldwide, including foreign transaction fees, and offers automatic cash-back rewards on purchases from select brands.
Truist Bank
Truist Bank offers two personal checking accounts without overdraft fees. The Truist Confidence Account does not charge fees for overdrafts, returned items, or overdraft protection transfers, typically declining transactions that exceed account balances. The Truist One account provides qualifying customers with a $100 negative balance buffer.
In addition to these banks, other financial institutions such as Ally Bank, Citizens Bank, Regions Bank, and Santander Bank have also taken steps to reduce or eliminate overdraft fees. It is worth noting that the availability and specifics of these offerings may change over time, so it is always a good idea to review the most up-to-date information from the banks directly.
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Overdraft fee alternatives
Overdraft fees are typically incurred when an account holder spends more money than is available in their account. Banks usually charge a fee for each overdraft transaction, which can quickly add up. However, there are several alternatives to incurring overdraft fees. Here are some options:
Opt-out of Overdraft Coverage
By law, banks cannot charge overdraft fees for certain transactions unless you opt in to overdraft coverage. If you do not opt in, your bank will decline transactions that exceed your account balance, and you will avoid overdraft fees. However, this means that transactions that would have resulted in an overdraft will be declined.
Link Your Savings Account
If you have a separate savings account, you can link it to your checking account. If you overdraw your checking account, the bank can automatically pull funds from your savings account to cover the shortage, provided there are sufficient funds. While your bank may charge a fee for this transfer, it is typically lower than an overdraft fee.
Overdraft Line of Credit
You can set up an overdraft line of credit, which is a loan that covers overdrafts. Under this agreement, a preset amount is transferred from the line of credit to your checking account whenever an overdraft occurs. Interest is charged on the amount advanced, and the overdraft line of credit is subject to credit approval.
Choose a Different Bank or Account Type
Some banks offer accounts with low or no overdraft fees. For example, Bank On-certified accounts offer no overdraft fees and may provide free services like ATM withdrawals. Alternatively, some banks offer \"checkless\" checking accounts that allow customers to avoid overdraft charges entirely.
Keep Track of Your Transactions
Monitor your account balance and keep track of your transactions, especially electronic ones such as ATM withdrawals, debit card purchases, and online payments. Many banks offer online banking and alerts to help you stay informed about your account balance and recent transactions. This can help you avoid overdrawing your account.
By considering these alternatives, you can make informed choices to reduce or eliminate overdraft fees and better manage your finances.
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Frequently asked questions
Overdraft fees are charges from your bank when your checking account doesn't have enough money to cover a purchase. These fees can range from $15 to $40 per transaction.
No, not all banks charge daily overdraft fees. Many banks have stopped charging overdraft fees altogether. Banks that do charge overdraft fees may also charge a daily fee for every day that your account remains overdrawn.
You can avoid daily overdraft fees by opting out of overdraft coverage. If you opt out, your transactions will be declined if you don't have enough funds in your account. You can also choose an account with no overdraft fees or consider a bank that offers low-fee accounts.
The Overdraft Protection Act of 2021 makes it illegal for banks to be deceptive or unfair about their overdraft coverage. Banks are required to provide clear information about overdraft coverage fees and whether a transaction could be declined due to insufficient funds.
If you've been charged an overdraft fee, contact your bank as soon as possible and ask if they can waive the fee. Banks are more likely to grant a one-time waiver if you rarely overdraw your account or have been a long-time customer.
