Your bank will cover the transaction, charge you a fee, and the money becomes a debt you owe

When you spend more than you have in your checking account, your bank can either pay the transaction and charge you an overdraft fee, or decline the transaction and charge you a non-sufficient funds (NSF) fee. Most banks do this automatically unless you have opted out. The fee is usually $25 to $35 per transaction, though some banks charge less and some charge more. You then owe your bank the overdraft amount plus the fee.

The key difference between overdraft protection and overdraft fees: overdraft protection means your bank covers the shortfall (and charges you for it), while an NSF fee means your bank refuses to cover it (and charges you anyway). Either way, you pay. The only way to avoid both is to keep enough money in your account or turn off overdraft coverage entirely.

Key Takeaways

  • Your bank will charge you $25 to $35 per overdraft transaction unless you have turned off overdraft coverage in your account settings.
  • Overdraft fees stack: if you overdraw multiple times in one day, you can be charged multiple fees on the same shortfall.
  • You can turn off overdraft protection for debit card and ATM transactions, though this will cause those transactions to be declined instead.
  • If you overdraw repeatedly, your bank may close your account or report you to ChexSystems, which makes opening a new account elsewhere harder.
  • Some banks offer overdraft grace periods or fee waivers for first-time overdrafts, but you have to ask or check your account agreement.

How overdraft fees stack up in a single day

Banks process transactions in a specific order, usually largest to smallest, not in the order you made them. This means a small purchase early in the day can trigger multiple overdraft fees if larger transactions post later and push your balance negative. For example: you have $50, you buy coffee for $5, then your paycheck deposit fails to go through, then you buy gas for $40. The bank might process the gas first (overdraft fee), then the coffee (another overdraft fee), leaving you down $90 in fees on a $45 in spending.

Federal rules now cap overdraft fees at one per day per account, though this rule is recent and not all banks have fully implemented it. Check your bank's overdraft policy in writing—usually in the account agreement or fee schedule—to see exactly how they handle multiple transactions on the same day.

What happens to your account after an overdraft

A single overdraft usually does not close your account. Your bank will deduct the fee from your balance (making it more negative) and send you a notice. You then have a grace period—usually 5 to 10 business days—to deposit money and bring your balance back to zero or positive. If you do not, your bank may freeze your account, meaning you cannot make new transactions until the balance is settled.

Repeated overdrafts are different. If you overdraw your account more than a few times in a year, your bank may close it without warning. When a bank closes your account for overdraft abuse, they report it to ChexSystems, a banking history database. Other banks check ChexSystems when you try to open a new account, and a report there can make it very hard to open a checking account elsewhere for up to five years.

How to turn off overdraft protection

You can disable overdraft coverage for debit card and ATM transactions through your bank's website, mobile app, or by calling customer service. The exact steps vary by bank, but the option is usually under "Account Settings" or "Overdraft Protection." When you turn it off, transactions that would overdraw your account will simply be declined at the point of sale—you will not be charged an overdraft fee, but the transaction will not go through.

Important: turning off overdraft protection does not protect you from overdrafts on checks, automatic bill payments, or ACH transfers (bank-to-bank transfers). Those can still overdraw your account and trigger fees even if you have disabled overdraft coverage for debit cards. If you want full protection, you need to monitor your balance closely or set up low-balance alerts through your bank's app.

Overdraft fees versus NSF fees

An overdraft fee is charged when your bank covers a transaction that would have made your balance negative. An NSF fee (non-sufficient funds) is charged when your bank refuses to cover the transaction because you do not have enough money. Both fees are usually $25 to $35, and both are charged to you. The difference is whether the transaction went through: overdraft means it did, NSF means it did not.

Some banks charge overdraft fees only, some charge NSF fees only, and some charge both depending on the type of transaction. A check that bounces usually triggers an NSF fee. A debit card transaction that goes through despite insufficient funds usually triggers an overdraft fee. Read your bank's fee schedule to know which fees apply to which transactions.

What to do if you cannot pay back an overdraft

Contact your bank immediately. Many banks will waive one overdraft fee per year if you ask, especially if you have been a customer for a while and this is your first overdraft. Some banks offer overdraft grace periods—usually 24 to 48 hours—during which you can deposit money without being charged a fee. Ask whether your bank has this policy.

If your bank will not waive the fee, you still owe the money. Your bank can freeze your account, report you to ChexSystems, or send your debt to a collection agency if the overdraft is large enough and you ignore it for months. The best move is to deposit money as soon as you can, even if it is not the full amount. Showing good faith by paying something down quickly can sometimes lead to a fee waiver on future overdrafts.

Banks that charge lower overdraft fees or offer alternatives

Not all banks charge the same overdraft fees. Some online banks and credit unions charge $15 to $20 per overdraft instead of $35. A few banks, including some credit unions, offer overdraft protection linked to a savings account or credit card—if you overdraw checking, money automatically transfers from savings or a line of credit, usually with a smaller fee ($5 to $10) than a traditional overdraft fee.

If overdraft fees are a recurring problem, switching to a bank with lower fees or a credit union with overdraft protection can save you hundreds of dollars per year. Before you switch, check whether the new bank reports to ChexSystems and whether your current bank's overdraft report will affect your ability to open an account there.

Frequently Asked Questions

Can my bank charge me an overdraft fee if I did not authorize overdraft protection?

Yes. Overdraft protection is turned on by default at most banks. You have to actively turn it off to prevent overdraft fees. If you never opted in, you likely have it enabled. Check your account settings or call your bank to confirm and disable it if you want.

How long does an overdraft stay on my record?

An overdraft itself does not stay on your credit report. However, if your bank reports you to ChexSystems for repeated overdrafts or closes your account, that report stays for up to five years. A single overdraft fee does not trigger a ChexSystems report.

Will overdraft fees hurt my credit score?

Overdraft fees alone do not affect your credit score because they do not appear on your credit report. However, if your overdraft debt goes unpaid for months and your bank sends it to a collection agency, that collection account will hurt your credit score significantly.

Can I dispute an overdraft fee?

Yes. Call your bank and ask them to review the fee. If it is your first overdraft or if the bank made an error in processing order, they may waive it. If you have a history of overdrafts, they are less likely to waive it, but asking costs nothing.

What is the difference between overdraft and going into debt?

An overdraft is a specific type of debt—money you owe your bank because you spent more than you had. Your bank charges you a fee for this service. Once you pay back the overdraft amount plus the fee, the debt is settled. It does not carry interest like a credit card or loan.