An overdraft happens when a transaction pushes your account balance below zero. Banks may cover the transaction and charge an overdraft fee, or decline the transaction with no fee, depending on your settings and the bank's policy.
This guide covers how overdrafts work, the typical fees, your right to opt out, and how to avoid them altogether.
How an Overdraft Works
A debit card swipe, ACH debit, or check that exceeds your available balance triggers an overdraft. The bank has three options:
- Pay the transaction and charge an overdraft fee.
- Decline the transaction with no fee (or a smaller NSF fee).
- Pull from a linked savings account or line of credit (overdraft protection).
Your account settings control which one happens.
Typical Overdraft Fees
Standard fees in 2026:
- Overdraft fee: $25 to $35 per item.
- NSF (non-sufficient funds) fee: $25 to $35 if the bank declines.
- Extended overdraft fee: $5 to $10 per day if the account stays negative.
- Daily cap: usually 3 to 6 overdraft fees per day.
Some online banks have eliminated overdraft fees entirely. Always check your bank's fee schedule.
Your Right to Opt Out
Federal Regulation E requires banks to get your opt-in before charging overdraft fees on one-time debit card and ATM transactions. If you have not opted in, those transactions are simply declined when there is not enough money.
Recurring debits and checks are not covered by the opt-in rule. The bank can pay them and charge a fee even without opt-in.
Overdraft Protection
Overdraft protection links your checking account to a savings account or line of credit. When the checking account would go negative, the bank pulls from the linked account.
Transfer fees for overdraft protection are usually $5 to $12, much less than the standard overdraft fee. Some banks waive the transfer fee entirely.
How to Avoid Overdrafts
Five practical steps:
- Opt out of overdraft on debit and ATM transactions.
- Set a low-balance alert at $50 or $100.
- Keep a small buffer in checking ($100 to $200 above your next bill).
- Track recurring debits in a calendar so you know when each one hits.
- Set up overdraft protection from a linked HYSA.
An app like Brigit can warn you about an upcoming bill and even send a small advance to keep your account positive, often for less than the cost of one overdraft fee.
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Overdrafts and Banking History
Frequent overdrafts can lead to:
- Account closure by the bank.
- A negative ChexSystems report (visible to other banks for 5 years).
- Difficulty opening new accounts.
If you have past overdraft issues, second-chance checking accounts can give you a fresh start while you build cleaner banking habits.
Overdrafts and Credit Score
An overdraft itself does not appear on your credit report. But unpaid overdraft balances sent to collections can show up as a collection account, which significantly hurts your credit score.
While you fix the cash-flow side, you can build credit on the credit-card side. Firstcard's credit builder card reports on-time payments to all three bureaus, so even a small monthly charge paid in full can help offset older negative items.
Frequently Asked Questions
Can a bank overdraft be reversed?
Yes, sometimes. Banks may waive an overdraft fee once or twice as a courtesy, especially for first-time customers in good standing. Call customer service and ask politely.
What is the difference between overdraft and NSF?
An overdraft means the bank covered the transaction and charged a fee. An NSF means the bank rejected the transaction and may also have charged a fee. Both can hit at the same time on different transactions.
Can overdraft fees be illegal?
Some overdraft practices have been ruled deceptive (like resequencing transactions to maximize fees) and led to class-action settlements. The CFPB has tightened rules around overdraft disclosures and opt-in requirements.
How can I get an overdraft fee refunded?
Call customer service, explain the situation, and ask for a one-time courtesy waiver. Polite first-time customers in good standing often succeed. Banks track waiver history, so do not expect repeated refunds.
