What happens when you overdraw your checking account
When you spend more money than you have in your checking account, your bank can either decline the transaction or pay it anyway and put your account into negative balance. If the bank pays it, you now owe the bank money—that negative balance is an overdraft. The bank charges you a fee for this service, usually between $25 and $35 per transaction, though some banks charge more.
Not every transaction triggers an overdraft fee. Debit card purchases, ATM withdrawals, and checks are the most common ones. Automatic bill payments and ACH transfers (like moving money between accounts) sometimes overdraw you too, depending on your bank's rules. Some banks will decline these transactions instead of overdrawing, which means the payment simply does not go through.
The bank does not have to let you overdraw. Many banks offer overdraft protection as an optional service—you can turn it on or off in your account settings. If you turn it off, transactions that would overdraw you get declined instead. If you leave it on, the bank pays the transaction and charges you the fee.
Key Takeaways
- Overdraft fees typically range from $25 to $35 per transaction, and you can be charged multiple fees in a single day if several transactions overdraw your account.
- Your bank can decline transactions that would overdraw you, or it can pay them and charge you a fee—which option happens depends on your bank's settings and your account type.
- Overdraft protection can mean either declining transactions to prevent overdrafts, or automatically transferring money from a linked savings account to cover the shortfall.
- If your account stays negative for several days, you may face additional fees or have your account closed by the bank.
- You can turn overdraft protection on or off yourself through your bank's website or app, or by calling customer service.
How overdraft fees add up quickly
A single overdraft fee is painful. Multiple fees in one day are worse. Many banks charge one fee per transaction that overdrafts your account, not one fee per day. If you make five debit card purchases while your account is negative, you could be charged five separate overdraft fees—$125 to $175 depending on your bank.
Some banks cap the number of overdraft fees you can be charged in a single day. Chase, for example, caps overdraft fees at four per day for consumer accounts. Bank of America caps them at four per day as well. But other banks have no daily cap, which means the fees can accumulate without limit. Check your bank's overdraft policy in your account agreement or by calling customer service.
The longer your account stays negative, the more fees pile up. If you overdraw on a Friday and do not deposit money until the following Wednesday, you could be charged fees for each day your account was negative, depending on your bank's policy. Some banks charge a daily fee for accounts that remain overdrawn; others charge only per transaction.
Overdraft protection: decline versus transfer
Overdraft protection has two different meanings depending on your bank. The first type simply declines transactions that would overdraw your account. This prevents fees entirely because the transaction never goes through. The second type automatically transfers money from a linked savings account or credit line to cover the overdraft, which prevents the negative balance but may charge a smaller transfer fee instead of an overdraft fee.
Most banks offer the first type—declining transactions—as the default option if you turn overdraft protection on. This is the safer choice because you cannot be charged overdraft fees if transactions are declined. You will know immediately that a purchase did not go through, and you can use a different payment method or wait until you have funds available.
The second type, automatic transfer from savings, is less common but available at some banks and credit unions. If you have this option and you link a savings account, the bank will move money from savings to checking to cover overdrafts. This keeps your checking account positive but drains your savings account. Some banks charge a small fee for each transfer, usually $1 to $3, which is much cheaper than an overdraft fee.
How to turn overdraft protection on or off
You control whether your bank allows overdrafts on your account. Log into your bank's website or mobile app and look for account settings, preferences, or overdraft options. The exact location varies by bank, but most banks put this setting under "Account Services," "Overdraft Settings," or "Transaction Controls."
If you cannot find the setting online, call your bank's customer service number. Tell them you want to turn overdraft protection on or off. They will ask which transactions you want protected—some banks let you choose whether to protect debit card purchases, checks, or automatic payments separately. Write down what you choose and ask the representative to confirm the change in writing or send you an email confirmation.
Changes usually take effect within one business day, though some banks apply them immediately. If you turn off overdraft protection, transactions that would overdraw your account will be declined going forward. If you turn it on, your bank will pay overdrafts and charge fees as usual.
What to do if you overdraw your account
If your account goes negative, deposit money as soon as possible to bring it back to zero or positive. The sooner you do this, the fewer additional fees you will be charged. Some banks will reverse one overdraft fee if you ask, especially if it is your first time or if you deposit money quickly. Call customer service and explain the situation—it does not hurt to ask.
If you cannot deposit money immediately, contact your bank and ask about their overdraft policies. Some banks offer a grace period before charging fees, though this is rare. Others will work with you if you have a history of on-time payments and this is an isolated incident. Be honest about your situation and ask what options exist.
If your account stays negative for 30 days or more, your bank may close the account and report you to ChexSystems, a checking account history database. This can make it harder to open a new checking account at other banks for up to five years. Avoid letting an overdraft go unpaid for this long.
Overdraft versus NSF: what is the difference
NSF stands for "non-sufficient funds." An NSF fee is charged when you try to make a transaction but your account does not have enough money and your bank declines it. An overdraft fee is charged when your bank pays the transaction anyway and your account goes negative. The fee amounts are usually the same—$25 to $35—but they happen in different situations.
If overdraft protection is turned off, you get NSF fees. If overdraft protection is turned on, you get overdraft fees. Some banks charge both: an NSF fee if a check bounces, and an overdraft fee if a debit card transaction goes through. Read your account agreement to understand which fees apply to which transactions at your bank.
Alternatives to overdrafting
If you are overdrawing regularly, overdraft fees are a sign that your spending is outpacing your income. The cheapest solution is to spend less than you earn, but that is not always possible in the short term. A few other options exist.
A line of credit from your bank or credit union is cheaper than overdraft fees. Interest rates on lines of credit are typically 10 to 20 percent annually, which is high but lower than the effective rate you pay with overdraft fees. If you overdraw $100 and pay a $35 fee, you are paying 35 percent for a few days of borrowing. A line of credit lets you borrow at a lower rate.
A savings buffer is the best long-term solution. Keep $200 to $500 in your checking account as a cushion so small mistakes do not trigger overdrafts. This takes time to build if you are living paycheck to paycheck, but even $50 helps. Some banks offer savings accounts linked to checking accounts that make it easy to move money over when you need it.
Frequently Asked Questions
Can a bank charge me overdraft fees without my permission?
Banks can charge overdraft fees if you have overdraft protection turned on, which is often the default setting. You have the right to turn it off and decline transactions instead. However, some banks require you to opt in to overdraft protection for debit card and ATM transactions specifically, so check your account agreement or call to confirm your current settings.
How long do I have to pay back an overdraft?
You must bring your account back to zero or positive as soon as possible. There is no formal grace period—banks can charge additional fees every day your account remains negative. If your account stays negative for 30 days or longer, the bank may close it and report you to ChexSystems, which affects your ability to open accounts elsewhere.
Will overdraft fees hurt my credit score?
Overdraft fees themselves do not appear on your credit report and do not directly hurt your credit score. However, if your account is closed due to unpaid overdrafts and sent to collections, that will damage your credit. Pay overdrafts promptly to avoid this outcome.
Can I get overdraft fees refunded?
Some banks will reverse one or two overdraft fees if you ask, especially if you have a good account history or if this is your first time. Call customer service and explain the situation. There is no may provide they will reverse the fee, but many banks will as a courtesy. Getting the fee reversed is more likely if you deposit money to cover the overdraft quickly.
What happens if I ignore an overdraft and never pay it back?
Your bank will eventually close your account and may send it to a collection agency. This appears on your credit report and makes it very difficult to open a new checking account. You could also face legal action if the amount is large enough. Always contact your bank if you cannot pay an overdraft—they may work out a payment plan with you.