The immediate cost of overdrawing

When you spend more money than you have in your checking account, your bank will either decline the transaction or let it go through and charge you an overdraft fee. Which one happens depends on whether you have overdraft protection turned on. If you do, the transaction goes through and you owe the bank money plus a fee—usually between $25 and $35 per overdraft, though some banks charge more. If you don't have overdraft protection, the transaction is rejected at the point of sale, and you pay nothing extra.

The fee hits your account immediately or within one business day. If you overdraw by $5 but the fee is $35, you now owe $40. That fee can trigger a second overdraft if your account balance is already low, which means you can be charged multiple times in a single day.

Key Takeaways

  • Overdraft fees typically range from $25 to $35 per transaction and are charged by your bank, not a government agency.
  • Multiple overdrafts in one day can result in multiple fees stacking on top of each other, sometimes totaling $100 or more.
  • You can turn overdraft protection off in your bank's app or by calling customer service to prevent transactions from going through when your balance is too low.
  • If you cannot pay back the overdraft within a few weeks, your bank may close your account and report you to ChexSystems, which affects your ability to open accounts elsewhere.
  • Some banks offer a grace period or courtesy overdraft once per year, but this is not may provide and varies by institution.

How overdraft fees stack up in a single day

Banks process transactions in a specific order, usually largest to smallest rather than the order you made them. This means if you make five small purchases and one large one, the bank might process the large purchase first, overdraw your account, and then charge you a fee for each of the small purchases that follow—even though you made them first.

A common scenario: you have $50 in your account. You buy coffee for $6, gas for $40, and lunch for $15. If the bank processes the gas purchase first, your account goes negative by $5. The coffee and lunch purchases then each trigger a $30 overdraft fee. You end up owing $65 in fees alone, on top of the $61 in purchases you made. Some banks cap the number of overdraft fees per day (often at three or four), but not all do.

What happens to your account over time

If you pay back the overdraft amount within a few days, the incident closes and your account returns to normal. Your bank does not report a single overdraft to credit bureaus, so it will not damage your credit score. However, if you remain overdrawn for weeks or if you overdraw repeatedly, your bank may close your account without warning.

Once your account is closed, your bank reports it to ChexSystems, a banking history database. Other banks check ChexSystems when you try to open a new account. A closed account due to overdraft can make it difficult or impossible to open a checking account elsewhere for up to five years, depending on the bank's policy. Some banks will still open an account for you but may require a deposit or offer only a limited account with fewer features.

Turning off overdraft protection

Most banks offer overdraft protection as an opt-in or opt-out feature. If you have it turned on, transactions will go through even when your balance is insufficient, and you will be charged a fee. If you turn it off, transactions will be declined instead, and you will pay nothing.

To turn off overdraft protection, log into your bank's app or website and look for settings related to overdrafts or transaction protection. You can usually find this under "Account Settings" or "Debit Card Settings." If you cannot find it online, call your bank's customer service line—the number is on the back of your debit card. Turning it off takes effect immediately, though some banks require you to confirm the change within 24 hours.

Turning off overdraft protection means your debit card will be declined if you do not have enough money, which can be embarrassing at checkout but prevents surprise fees. Some people keep it on for emergencies and monitor their balance closely instead.

Overdraft protection through a linked savings account

Some banks offer overdraft protection that links your checking account to a savings account or line of credit. If you overdraw, the bank automatically transfers money from the linked account to cover the shortfall. This usually costs $10 to $15 per transfer, which is less than a standard overdraft fee, and it prevents your account from going negative.

To set this up, you need a savings account at the same bank. When you overdraw, the bank moves money from savings to checking automatically. You then repay the savings account when you can. This works well if you have a small emergency fund in savings, but it does not help if both accounts are empty.

Recovering from repeated overdrafts

If you have overdrafted multiple times and your account is still open, contact your bank and ask whether they will waive one or more fees as a courtesy. Banks sometimes do this if you have been a customer for a long time or if the overdrafts were caused by a system error. There is no may provide, but asking costs nothing.

If your account has been closed due to overdraft, you can try to reopen it after six months to a year, depending on the bank. Some banks will not reopen a closed account under any circumstances. Your best option is to open an account at a different bank. Look for banks that offer second-chance checking accounts, which are designed for people with ChexSystems records. These accounts often have lower fees and smaller minimum balances.

Frequently Asked Questions

Can a bank charge me multiple overdraft fees on the same day?

Yes. If you make several transactions while overdrawn, each one can trigger a separate fee. Some banks cap this at three or four fees per day, but others do not. Check your bank's overdraft policy in your account agreement or by calling customer service.

Will an overdraft hurt my credit score?

A single overdraft will not appear on your credit report. However, if you remain overdrawn for a long time and your bank sends the debt to a collection agency, that can damage your credit. Most banks close accounts before that happens.

What is the difference between overdraft fees and NSF fees?

An overdraft fee is charged when a transaction goes through and your account goes negative. An NSF (non-sufficient funds) fee is charged when a transaction is declined because you do not have enough money. With overdraft protection on, you get overdraft fees. With it off, you get NSF fees or no fee at all, depending on the bank.

Can I dispute an overdraft fee?

You can ask your bank to waive the fee, especially if it was caused by a bank error or if you have a good account history. Send a written request to your bank's customer service department or call the number on your statement. The bank is not required to waive it, but many will if you ask politely and have not overdrafted before.

How long does a closed account stay on ChexSystems?

A closed account typically stays on ChexSystems for five years. After that, it is removed and no longer appears when other banks check your history. Some banks may still see it if they have their own internal records, but most will not.