What happens when you overdraft a checking account
When you spend more money than you have in your checking account, your bank can cover the difference and let the transaction go through. This is called an overdraft. Your account balance goes negative, and you now owe the bank money. The bank charges you an overdraft fee — typically $25 to $35 per transaction — and may charge additional fees if your account stays negative for several days.
Not every bank allows overdrafts automatically. Some banks will simply decline the transaction and charge you a non-sufficient funds (NSF) fee instead. Others require you to opt in to overdraft protection before they will cover transactions that exceed your balance. The rules vary by bank, so check your account agreement or call your bank to find out what happens in your case.
Once your account is overdrawn, the clock starts. You have a window — usually three to five business days — to deposit money and bring your balance back to zero or positive. If you do not, the bank may charge you an additional daily fee for each day the account remains negative, sometimes called a sustained overdraft fee or extended overdraft fee. Some banks cap these fees; others do not.
Key Takeaways
- An overdraft occurs when a transaction brings your account balance below zero, and your bank covers the shortfall by charging you an overdraft fee.
- Overdraft fees typically range from $25 to $35 per transaction, and additional daily fees may apply if your account stays negative for more than a few days.
- You must opt in to overdraft protection at most banks; without it, transactions will be declined and you will pay a non-sufficient funds fee instead.
- Depositing money within three to five business days usually stops additional fees from accumulating, but the exact timeline depends on your bank's policy.
- Banks report overdrafts to ChexSystems, a checking account history database, which can make it harder to open accounts at other banks.
How overdraft protection works
Overdraft protection is a service that allows your bank to cover transactions even when your balance is insufficient. To activate it, you typically contact your bank by phone, online, or in person and request the service. Some banks turn it on by default; others require you to opt in. Once it is active, any transaction that would overdraft your account — a debit card purchase, check, ATM withdrawal, or automatic bill payment — will go through, and you will be charged a fee.
The alternative is to decline overdraft protection. If you do, your bank will decline transactions that exceed your balance and charge you a non-sufficient funds fee instead, usually $25 to $35. This protects you from overdraft fees but means your transactions will fail, which can be inconvenient if you are not monitoring your balance closely.
Some banks also offer overdraft lines of credit, which work differently. Instead of charging a per-transaction fee, the bank treats the overdraft as a short-term loan and charges you interest on the amount you owe. This can be cheaper than overdraft fees if you stay overdrawn for more than a few days, but interest rates on these lines are typically high — 15% to 30% annually or more.
What fees you will pay and when
The cost of an overdraft depends on your bank and how long your account stays negative. Most banks charge one overdraft fee per transaction, even if multiple transactions hit your account on the same day. Some banks group transactions that occur within a short window — say, one hour — and charge only one fee for the group. Others charge a separate fee for each transaction, which can add up quickly if you make several purchases before realizing your balance is low.
If your account stays negative for more than a few days, additional fees kick in. A sustained overdraft fee — charged daily or every few days — typically ranges from $5 to $15 per day. A bank might charge you one overdraft fee of $35 when your account first goes negative, then $10 per day for each day it remains negative. After five days, you could owe $85 or more just in fees, on top of the original amount you overspent.
The total cost also depends on whether your bank charges fees on top of fees. Some banks will charge you an overdraft fee, then charge you another fee if that fee itself causes your account to go further negative. This is called a fee on fee or chained fee. Federal regulators have scrutinized this practice, and some banks have stopped doing it, but it remains common. Check your account agreement or ask your bank directly whether this applies to you.
How to recover from an overdraft
The fastest way to stop overdraft fees is to deposit money into your account. Once your balance is positive again, the bank stops charging overdraft fees. You do not owe interest on the overdrawn amount itself — only the fees the bank charged you. If you deposited $100 to cover a $50 overdraft plus a $35 fee, you have $15 left in your account and you are done.
If you cannot deposit enough to cover the full amount right away, deposit what you can as soon as possible. Many banks charge daily fees only while your account is negative, so getting to zero or positive stops the bleeding. If you are overdrawn by $50 and your bank charges $10 per day, depositing $50 today stops the daily fees from tomorrow onward.
If you have been overdrawn for a long time and the fees have accumulated, contact your bank and ask whether they will waive or reduce some of the fees. Banks have discretion here, and many will reverse one or two overdraft fees if you have a good history with them or if the overdraft was caused by an error on their part. This is not may provide, but it is worth asking, especially if you have been a customer for years.
How overdrafts affect your banking history
Banks report overdrafts to ChexSystems, a database that tracks checking account history. When you apply for a new checking account at another bank, that bank checks ChexSystems to see whether you have a history of overdrafts, bounced checks, or other problems. A recent overdraft — especially one that went unpaid for a long time — can make it harder or impossible to open a new account elsewhere.
The impact depends on how serious the overdraft was and how long ago it occurred. A single overdraft that you paid off within a week may not affect you much. An overdraft that went unpaid for months, or multiple overdrafts in a short period, can result in a bank denying your application or requiring you to use a second-chance checking account with higher fees and lower limits.
Overdrafts do not directly affect your credit score — credit bureaus do not see ChexSystems reports. However, if your bank sends your overdrawn account to a collection agency, that collection account will appear on your credit report and damage your score. This typically happens only if you owe a large amount and ignore the bank's attempts to collect.
How to avoid overdrafts
The most reliable way to avoid overdrafts is to keep a buffer in your account — money you do not spend. A buffer of $100 to $200 means that small mistakes or unexpected charges will not push you into the negative. This is not always possible if you live paycheck to paycheck, but even $20 or $30 can prevent overdrafts from small debit card purchases.
Set up account alerts through your bank's app or website. Most banks let you set a low-balance alert that notifies you when your balance drops below a certain amount — say, $50. This gives you time to deposit money or stop spending before you overdraft. Some banks also offer alerts when a transaction is about to be declined, which is useful if you have overdraft protection turned off.
Track your spending in real time. Every time you make a purchase, subtract it from your mental or written balance. This sounds tedious, but it is the most reliable way to know whether you have money left. Many people overdraft because they forget about automatic bill payments or do not realize how much they have spent on small debit card purchases.
If you are overdrawn frequently, consider whether overdraft protection is right for you. Turning it off means transactions will be declined, which is inconvenient, but it prevents you from accumulating large fees. Some people find that the inconvenience of a declined transaction is a useful wake-up call to check their balance more often.
Overdraft fees by bank type
| Bank Type | Typical Overdraft Fee | Daily Fees | Notes |
|---|---|---|---|
| Large national banks | $25–$35 | $5–$15 per day | May charge multiple fees per day if balance stays negative; some have reduced or eliminated overdraft fees in recent years |
| Credit unions | $15–$25 | $0–$5 per day | Often lower fees than banks; some offer free overdraft protection or overdraft lines of credit |
| Online banks | $0–$35 | $0–$10 per day | Policies vary widely; some online banks do not charge overdraft fees at all |
| Second-chance accounts | $25–$40 | $5–$15 per day | Designed for people with ChexSystems records; fees are typically higher and limits are lower |
Frequently Asked Questions
Can I get an overdraft fee reversed?
Yes, many banks will reverse one or two overdraft fees if you ask, especially if you have a good account history or if the overdraft was caused by a bank error. Call your bank's customer service line and explain the situation. There is no may provide, but it is worth asking. Banks have discretion to waive fees, and many do so to keep customers.
What is the difference between an overdraft fee and a non-sufficient funds fee?
An overdraft fee is charged when your bank covers a transaction that exceeds your balance. A non-sufficient funds (NSF) fee is charged when your bank declines a transaction because you do not have enough money. If you have overdraft protection turned on, you pay overdraft fees. If it is turned off, you pay NSF fees instead. Both typically cost $25 to $35.
Will an overdraft show up on my credit report?
An overdraft itself does not appear on your credit report. However, if your bank sends your overdrawn account to a collection agency, the collection account will appear on your credit report and lower your credit score. This usually happens only if you owe a large amount and ignore the bank's attempts to collect for several months.
How long does an overdraft stay on ChexSystems?
Overdrafts typically stay on your ChexSystems record for five years. After that, they are removed and should not affect your ability to open a new account. However, if you still owe the bank money from the overdraft, they can continue to pursue collection even after it falls off ChexSystems.
Can I overdraft my account if I do not opt in to overdraft protection?
No. If you have not opted in to overdraft protection, your bank will decline transactions that exceed your balance and charge you a non-sufficient funds fee instead. Your account will not go negative. You can request overdraft protection at any time by contacting your bank.