Overdraft Fees: News, Key Terms and Resources
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Editor’s note: Some of the information on this page may be outdated as of the publication date.
Banks charge overdraft fees when a customer makes a transaction that brings their account balance into the negative. Overdraft fees are typically in the range of $30-$35 per instance, and some banks charge that fee multiple times per day if the customer keeps making transactions that overdraw their account. Some banks also charge continuous negative balance fees. If the funds in a customer's account aren't replenished within a certain period, they will be charged an additional fee. (If you're looking for a new account, see NerdWallet's picks for best checking accounts.)
» MORE: Best banks for overdrafts
Overdraft fees can add up very quickly. People who don't pay their overdraft fees can sometimes have their information sent to ChexSystems, a reporting system that keeps track of consumers who might be risky bank customers. Being in ChexSystems can make it very difficult for you to open a new bank account.
» Learn more about ChexSystems
Some banks might reverse overdraft fees for customers in good standing. Still, if overdrafts are an ongoing problem, there are options for overdraft coverage and other ways to avoid paying an overdraft fee. Some major banks and credit unions have recently reduced or eliminated overdraft fees, including Discover® Bank, Ally, Capital One and Alliant Credit Union.
» See the latest in overdraft fee news
Banks that have recently reduced or eliminated overdraft fees
Financial institution | New overdraft policy and fees |
|---|---|
Alliant Credit Union | In 2021, Alliant Credit Union decided to eliminate overdraft and nonsufficient funds fees. |
Ally | In June 2021, Ally eliminated overdraft fees and now offers two forms of free overdraft coverage: free overdraft protection transfers from a linked Ally savings or money market account and its CoverDraft service, which allows customers to overdraft up to $100 with 14 days to replenish the account funds. |
Bank of America | Bank of America announced in 2022 that it will eliminate nonsufficient funds fees — also known as bounced check fees — and remove its overdraft protection transfer fee. In May 2022, the bank reduced its overdraft fee to $10 and this fee can only be charged two times per day. |
Capital One | Capital One announced in late 2021 that it would eliminate overdraft and nonsufficient funds fees for customers. |
Citibank | In summer 2022, Citibank removed overdraft fees, overdraft protection fees and returned items fees. |
Discover® Bank | In 2019, Discover removed its overdraft and insufficient fund fees. If a customer tries to make a transaction that would result in an overdraft, they can use a free overdraft protection transfer from another Discover account to cover the cost of the transaction. |
Banks are ditching overdraft fees
Glossary of overdraft terms
ChexSystems. ChexSystems tracks and provides reports on consumer deposit accounts. Someone might be reported to ChexSystems if they’ve failed to repay an overdraft fee, which means that other banks might not let that person open an account until that negative mark falls off their record after five years.
Continuous negative balance fee. If a customer doesn’t bring their bank account back to a positive balance after overdrafting, their bank might charge a continuous negative balance fee until the customer funds their account.
Nonsufficient funds (NSF) fee. A bank will charge a nonsufficient funds fee if a transaction is attempted that can’t be covered by the funds in an account. NSF fees are also known as bounced check fees.
Overdraft. An overdraft occurs when a bank customer makes a transaction for a higher amount of money than the available balance in their account.
Overdraft coverage. Overdraft coverage can take different forms, including overdraft protection transfers and overdraft lines of credit. Customers are allowed by law to opt out of overdraft coverage by contacting their bank and making the request, and then their bank will simply decline any transaction that would result in an overdraft.
Overdraft fee. When bank customers overdraft, their bank might charge a fee — with some ranging from $30 to $35 — to discourage overdraft activity. Sometimes a bank might charge this fee multiple times per day if a customer keeps making transactions that overdraft their account.
Overdraft line of credit. An overdraft line of credit is similar to a credit card in that it’s a set amount of money that a customer can borrow from if they overdraft their account. Like a credit card, there's typically a high-interest charge for using an overdraft line of credit, and that interest rate is usually dependent on your credit score.
Overdraft protection transfer. Some banks allow customers to link another account to their checking account. That way, if they make a transaction that would result in an overdraft, the difference would be taken from their linked account instead.
Overdraft protection transfer fee. Some banks charge a fee for allowing customers to transfer funds from a linked account to cover a transaction that would overdraft their primary account.
Prepaid debit card. Prepaid debit cards allow people to load a debit card with a set amount of money, which can help prevent overdrafts because any transaction beyond the available card funds will be declined.
Second chance checking account. Second chance checking accounts are designed to help people who have been blocked from opening a traditional bank account because of flawed banking history, such as having unpaid overdraft fees and being put in ChexSystems. These accounts allow people to rebuild their banking history until the negative marks fall off their records.
Learn about the basics of overdraft fees
What banks charge for overdraft fees
How to avoid or fix an overdraft fee
Latest news about overdraft fees
