Your bank covers the transaction, then charges you a fee

When you spend more money than you have in your checking account, your bank has a choice: cover the shortfall or decline the transaction. Most banks cover it—that is, they let the transaction go through even though your balance goes negative. Then they charge you an overdraft fee, usually between $25 and $35 per transaction, though some banks charge more. You now owe the bank both the amount you overspent and the fee.

The fee hits your account immediately or within one business day. Your balance drops further into the negative. If you do not deposit money to cover the overdraft within a set time—usually a few days to a week—the bank may charge you another fee for each day your account stays negative, or they may close your account and send what you owe to a collections agency.

Not all banks handle overdrafts the same way. Some decline the transaction instead of covering it, which means your debit card or check simply does not go through. Others offer overdraft protection, which links your checking account to a savings account or credit line so money transfers automatically if you go negative. Read your account agreement or call your bank to know which system you are under.

Key Takeaways

  • Your bank will cover most overdrafts and charge you a fee of $25 to $35 or more per transaction, even if you only overspent by a few dollars.
  • The fee appears in your account within one business day, making your negative balance worse and harder to recover from.
  • If your account stays negative for more than a few days, your bank may charge daily fees or close your account and refer you to collections.
  • Some banks decline transactions instead of covering them, and others offer overdraft protection that automatically transfers money from savings or a credit line.
  • Overdraft fees are not automatic—you can contact your bank to request a one-time reversal, especially if this is your first overdraft.

How overdraft fees stack up when you make multiple purchases

If you overdraft your account and then make another purchase before you deposit money, your bank charges you a separate overdraft fee for that second transaction. This is where overdraft costs spiral quickly. Spend $5 more than you have, get charged $30. Then buy coffee the next morning for $4 before you have deposited anything—another $30 fee. You now owe $39 in fees alone, on top of the $9 you actually overspent.

Banks typically charge one overdraft fee per transaction, but some charge one fee per day regardless of how many transactions occur. Others cap the number of overdraft fees they will charge in a single day—often three to five. Check your account agreement or ask your bank directly how they count overdraft fees, because this determines how much damage a single day of overspending can do.

The order in which your bank processes transactions also matters. Most banks process transactions in order of size, largest to smallest, rather than the order you made them. This can create more overdrafts than if they processed them in the order you spent the money. For example, if you have $50 and make a $20 purchase, then a $40 purchase, then a $10 purchase, your bank may process the $40 first, triggering an overdraft fee, then the $20 and $10, each triggering another fee. You end up with three overdraft fees instead of one.

What happens to your account if you stay negative for days or weeks

If you do not deposit money within a few days, most banks charge you a daily fee for maintaining a negative balance—sometimes called a "sustained overdraft fee" or "extended overdraft fee." This fee is usually $5 to $10 per day and compounds quickly. Stay negative for a week and you could owe $35 to $70 in daily fees on top of the original overdraft fees.

After 30 to 60 days of a negative balance, depending on your bank's policy, the bank may close your account without warning. Once closed, you cannot use the account, and the bank reports it to ChexSystems, a checking account history database. This report stays on file for five years and makes it difficult to open a new checking account at another bank. Some banks will still open an account for you, but others will decline based on the ChexSystems report alone.

If your account remains negative and unpaid for 60 to 90 days, your bank may send the debt to a collections agency. The collections agency will contact you by phone, email, or mail demanding payment. If you do not pay, they may sue you in small claims court, garnish your wages, or place a lien on your property, depending on your state's laws. The debt can also appear on your credit report and damage your credit score for seven years.

How to stop the overdraft fees from continuing

The fastest way to stop overdraft fees is to deposit money into your account. Deposit enough to cover the negative balance plus all the fees that have been charged. Your balance will return to zero or positive, and no more daily fees will accrue. If you cannot deposit the full amount immediately, deposit what you can—even a partial deposit stops the clock on some daily fees.

If you have overdrafted for the first time or only once before, call your bank and ask them to reverse the overdraft fee. Many banks will do this as a one-time courtesy, especially if you have had the account for years and maintained a good history. Be direct: "I overdrafted by accident. Can you reverse the fee?" Banks are not required to reverse fees, but they often will if you ask. Do not ask multiple times in a short period—one request per overdraft is the norm.

If you cannot reverse the fee and cannot deposit money immediately, ask your bank if they offer a grace period before they close your account or send the debt to collections. Some banks give you 30 days; others give you 10. Knowing the deadline helps you plan when to deposit money or decide whether to dispute the charges.

Opting out of overdraft coverage to avoid fees altogether

You can tell your bank to stop covering overdrafts. This is called opting out of overdraft protection. Once you opt out, your bank will decline transactions that would overdraft your account instead of covering them and charging you a fee. Your debit card will be declined, your check will bounce, or your online payment will fail—but you will not be charged an overdraft fee.

Opting out prevents overdraft fees but creates other problems. A declined debit card at a store is embarrassing. A bounced check can trigger a non-sufficient funds (NSF) fee from the merchant or the payee's bank, which is often the same price as an overdraft fee. An online bill payment that fails may result in a late payment on your credit report. For some people, declining transactions is better; for others, it creates more headaches than the fees themselves.

To opt out, contact your bank by phone, in person, or through their website. Ask to opt out of overdraft protection for debit card purchases and ATM withdrawals. (Banks are required to let you opt out of these; overdraft protection for checks and ACH transfers is optional and varies by bank.) The change usually takes effect within one to three business days. You can opt back in at any time if you change your mind.

Disputing an overdraft fee if the bank made an error

If your bank charged you an overdraft fee but you believe you had enough money in your account, or if they charged you multiple fees for a single transaction, dispute it. Call your bank and explain what happened. Ask them to review the transaction history and the balance at the time of the transaction. If they made an error—for example, they processed a deposit late or miscalculated your balance—they should reverse the fee.

Get the name and employee ID of the person you speak with, and ask them to send you a written confirmation of the dispute and the outcome. If they refuse to reverse the fee or if you disagree with their explanation, file a complaint with the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov. The CFPB investigates complaints against banks and can order them to refund fees if they violated federal regulations.

Keep records of all communications with your bank: dates, times, names, and what was said. If the bank closes your account or sends the debt to collections, these records help you prove the error if you need to dispute it later or defend yourself in court.

Moving to a bank with lower or no overdraft fees

If you overdraft frequently, switching banks may save you money. Some banks charge no overdraft fees at all. Others charge lower fees—$15 to $20 instead of $30 to $35. A few offer a small grace period: your account can be negative for one or two days before they charge a fee, giving you time to deposit money without penalty.

Online banks and credit unions often have lower overdraft fees or no overdraft fees at all. They also tend to have lower minimum balances and fewer monthly fees overall. The trade-off is that you cannot walk into a branch to deposit cash or speak to someone in person. If you need in-person banking, look for a credit union in your area—most allow you to use other credit unions' ATMs for free, and many have branches nationwide through shared branching networks.

Before you switch, check whether your current bank will waive the overdraft fee if you close your account. Some will, especially if you have been a customer for a long time. It is worth asking before you leave.

Frequently Asked Questions

Can my bank refuse to cover an overdraft?

Yes. Banks are not required to cover overdrafts. If you have opted out of overdraft protection or if your bank's policy is to decline overdrafts, the transaction will simply fail. You will not be charged an overdraft fee, but you also will not get the money or the item you tried to buy.

How long do I have to pay back an overdraft before my account is closed?

Most banks close accounts after 30 to 60 days of a negative balance, though some wait longer. Call your bank and ask their specific policy. If you know you cannot deposit money immediately, ask them how many days you have before they close the account.

Will an overdraft hurt my credit score?

An overdraft itself does not appear on your credit report. However, if your bank sends the debt to a collections agency and it goes unpaid, the collections account will appear on your credit report and damage your score. Paying the overdraft before it reaches collections prevents this.

What is the difference between an overdraft fee and an NSF fee?

An overdraft fee is charged by your bank when they cover a transaction that would make your account negative. An NSF (non-sufficient funds) fee is charged by the merchant's bank or the payee when a check or payment bounces because you did not have enough money. You may be charged both fees for the same transaction.

Can I negotiate my overdraft fee with my bank?

You can ask your bank to reverse or reduce the fee, especially if it is your first overdraft or if you have been a customer for years. Banks often will as a one-time courtesy. There is no harm in asking, but do not expect them to negotiate the fee amount itself—they typically reverse it or they do not.