An overdraft is when you spend money you don't have in your account, and your bank covers the difference
When your account balance drops below zero, you have overdrawn your account. Your bank can choose to pay the transaction anyway—covering the shortfall with its own money—or decline it. If the bank pays, you now owe them that amount plus an overdraft fee, usually between $25 and $35 per transaction, though some banks charge more. The fee hits your account immediately, making your negative balance worse.
Not all banks handle overdrafts the same way. Some automatically cover overdrafts on debit card purchases and checks. Others only cover overdrafts on checks and ACH transfers, letting debit card transactions decline instead. A few banks don't offer overdraft coverage at all and simply reject any transaction that would push you negative. You can usually see which approach your bank uses in your account settings or by calling customer service.
Overdrafts are optional—you can turn off overdraft protection if you want transactions to decline rather than trigger fees. But many people keep it on because a declined transaction can damage your reputation with a merchant or cause a check to bounce, which carries its own consequences.
Key Takeaways
- An overdraft happens when you spend more than your account balance, and your bank covers the difference by lending you money temporarily.
- Each overdraft transaction typically costs $25 to $35 in fees, and multiple overdrafts in one day can result in multiple fees stacking up.
- You can turn off overdraft protection in your account settings so transactions decline instead of overdrawing, avoiding fees but risking declined payments.
- The longer you stay overdrawn, the more fees accumulate, and your bank may eventually close your account or send the debt to a collection agency.
How overdraft fees stack up when you make multiple transactions
If you make several purchases while overdrawn, each one can trigger a separate fee. Say your balance is $50 and you swipe your debit card four times for $20 each. Your bank may charge you four overdraft fees—one for each transaction—even though you only went negative once. Some banks cap the total fees per day (often at two or three fees), but not all do, so you can end up paying $100 or more in fees from a single day of spending.
The order transactions post matters too. Banks don't always process transactions in the order you made them. They often post larger transactions first, which can trigger overdrafts earlier and create more fees than if smaller transactions posted first. This practice, called high-to-low posting order, is legal but works against you when you're close to zero.
Some banks also charge a daily fee if your account stays negative for more than a certain number of days—usually around $5 to $10 per day. These fees keep accumulating until you deposit money and bring your balance back above zero.
What happens to your account if you stay overdrawn
If you don't deposit money to cover the overdraft within a few days, your bank will send you a notice. Most banks give you 10 to 14 days to fix it before they take action. During this time, the overdraft fees keep piling up, and you may not be able to use your debit card or write checks.
If you ignore the notice and remain overdrawn past the deadline, your bank can close your account. Once closed, you'll be reported to ChexSystems, a banking history database that other banks check before opening new accounts. This report stays on file for five years and makes it harder to open a checking account elsewhere. Some banks specialize in second-chance accounts for people with ChexSystems records, but they often charge higher fees.
If the overdraft is large enough or stays unpaid long enough, your bank may send the debt to a collection agency. At that point, a collector will contact you by phone and mail, and the debt can appear on your credit report, damaging your credit score.
The difference between overdraft protection and overdraft fees
Overdraft protection is a service your bank offers to prevent overdrafts in the first place. The most common type links your checking account to a savings account or credit line. If you overdraw checking, the bank automatically transfers money from savings to cover it, or charges interest on a small loan instead of an overdraft fee. This costs less than overdraft fees if you use it occasionally, but it only works if you have money in savings or a credit line available.
Overdraft fees are what you pay when your bank covers an overdraft without a linked account. These are the $25 to $35 charges that hit your account each time you go negative. They're not a loan—they're a penalty for overdrawing.
Some banks offer both. You might have overdraft protection on your savings account but still pay overdraft fees on debit card transactions if your savings runs out. Read your account agreement or call your bank to understand which protection you have and which transactions it covers.
How to turn off overdraft protection and prevent overdrafts
Most banks let you disable overdraft coverage through online banking or by calling customer service. Once it's off, any transaction that would make your balance negative will simply decline. You won't be charged a fee, but the merchant will see the transaction as rejected, and you may face consequences depending on what you were paying for.
If you turn off overdraft protection for debit card purchases but keep it on for checks and ACH transfers, you get a middle ground: checks and automatic bill payments won't bounce, but everyday card swipes will decline if you don't have the funds. This is a common setup for people who want to avoid overdraft fees but need protection for essential payments.
To prevent overdrafts altogether, set up account alerts through your bank's app or website. Most banks let you choose a balance threshold—say $100—and send you a text or email when your balance drops below it. Some banks also offer a feature that rounds up debit card purchases to the nearest dollar and moves the difference to savings, which creates a small cushion.
Overdrafts on checks and automatic payments work differently than debit cards
When you write a check or set up an automatic bill payment (ACH transfer), your bank processes it differently than a debit card swipe. The transaction doesn't happen instantly—it can take one to three business days to clear. During that time, your balance may change, and by the time the check or payment actually posts, you might be overdrawn even though you had money when you wrote it.
Banks almost always cover overdrafts on checks and ACH transfers because declining them can cause serious problems: a bounced check damages your reputation with the payee and can result in a returned check fee from the bank (usually $25 to $35 on top of the overdraft fee). An automatic bill payment that declines can trigger late fees from the creditor and hurt your credit score.
If you bounce a check, the person or business you wrote it to may also charge you a returned check fee, which can be $25 or more. So a single bounced check can cost you an overdraft fee from your bank plus a returned check fee from the payee—$50 or more total.
What to do if you've been charged overdraft fees
If you've been hit with overdraft fees, contact your bank and ask them to reverse at least one. Banks have discretion to waive fees, especially if you've been a customer for a while or if this is your first overdraft. Be polite and explain your situation—many banks will reverse one or two fees as a courtesy. If you've had multiple overdrafts in a short time, ask if they can waive all of them.
Some banks have a "courtesy reversal" policy that allows them to waive a certain number of fees per year without asking. Others will reverse fees if you can show the overdraft was caused by a bank error, like a delayed deposit posting or a transaction posting out of order.
If your bank refuses to reverse fees and you believe they violated banking regulations, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state's banking regulator. The CFPB accepts complaints online at consumerfinance.gov and investigates whether banks are treating customers fairly.
Frequently Asked Questions
Can I get an overdraft fee reversed if I pay it back quickly?
Yes, banks often reverse overdraft fees if you ask, especially if you deposit money to cover the overdraft within a few days. Call your bank's customer service and explain that you've corrected the balance. Many banks will waive at least one fee per year as a courtesy, even if you don't have a specific reason.
What's the difference between an overdraft and a bounced check?
An overdraft is when your bank covers a transaction and charges you a fee. A bounced check is when your bank declines to cover it and returns the check unpaid. Both cost money—overdraft fees from your bank, and returned check fees from both your bank and the payee—but a bounced check also damages your reputation with whoever you wrote it to.
Will an overdraft hurt my credit score?
A single overdraft won't appear on your credit report unless your bank sends the debt to a collection agency, which usually happens only if you stay overdrawn for weeks or months. However, if you bounce checks or miss payments because of overdrafts, those can hurt your credit if they're reported to credit bureaus.
Can I overdraft my savings account?
Yes, savings accounts can overdraft just like checking accounts, though it's less common. Banks are less likely to cover overdrafts on savings accounts, and some don't allow it at all. Check your account agreement or call your bank to see if overdraft protection is available on your savings account.
What happens if I ignore overdraft notices from my bank?
Your bank will eventually close your account and report you to ChexSystems, making it difficult to open a new account at other banks for five years. If the overdraft is large enough, the bank may send it to a collection agency, which will contact you and can report the debt to credit bureaus, damaging your credit score.