Your bank covers the transaction, then charges you a fee

When you spend more money than you have in your checking account, your bank can cover the shortfall—a process called overdraft coverage. The transaction goes through. Your account balance goes negative. Then the bank charges you an overdraft fee, usually $25 to $35 per transaction, though some banks charge less and some charge more.

Not every bank offers this automatically. Some will simply decline the transaction instead, which stops the purchase but may still trigger a fee called an insufficient funds fee or non-sufficient funds (NSF) fee. Others let you opt into overdraft coverage so transactions don't bounce. The key difference: with overdraft coverage, your purchase succeeds and you owe the bank money plus a fee. Without it, your purchase fails and you may still owe a fee for trying.

The fee hits your account immediately or within one business day. If you don't deposit money to cover the negative balance quickly, you may face additional fees for each day your account stays negative, or a second overdraft fee if another transaction posts while you're still in the red.

Key Takeaways

  • When you overdraft, your bank covers the transaction and charges a fee of $25 to $35, though the amount varies by bank.
  • Some banks decline transactions instead of covering them, which may still result in an NSF fee even though the purchase didn't go through.
  • Multiple transactions can post while your account is negative, and each one may trigger its own overdraft fee.
  • You must deposit money to bring your account back to zero or positive; the bank will not automatically reverse the overdraft or waive the fee.
  • Some banks offer overdraft protection linked to a savings account or credit line, which covers the negative balance without a fee or with a smaller charge.

How overdraft fees stack up when multiple transactions post

If your account is negative and another transaction posts before you deposit money, that transaction may trigger a second overdraft fee. Banks process transactions in different orders—not always the order you made them—so a small purchase that posted last might push you over the edge and cost you another $25 to $35.

Some banks cap the number of overdraft fees they charge in a single day. Others do not. If you're $50 negative and five transactions post while you're in the red, you could face five separate overdraft fees, totaling $125 to $175, even though your original shortfall was only $50. This is why overdrafts can spiral quickly if you don't catch them right away.

Banks also vary on whether they charge a fee for each transaction that overdrafts your account, or only one fee per day no matter how many transactions post. Check your account agreement or call your bank to learn their specific policy.

The difference between overdraft coverage and overdraft protection

Overdraft coverage is what most banks offer by default: they cover the transaction and charge you a fee. You're responsible for repaying the negative balance plus the fee.

Overdraft protection is an optional service that links your checking account to another account—usually a savings account, money market account, or credit line at the same bank. When you overdraft, the bank automatically transfers money from the linked account to cover the shortfall. You may pay a small transfer fee (often $1 to $3) instead of a large overdraft fee, or no fee at all depending on the bank.

Overdraft protection requires you to set it up in advance. If you don't have it and your bank doesn't offer automatic coverage, transactions will simply be declined. Ask your bank whether overdraft protection is available and what it costs to set up.

How long you have to fix a negative balance

There is no legal deadline to bring your account back to zero. However, your bank may close your account if it stays negative for too long—typically 30 to 60 days, though this varies. Once closed, you may be reported to ChexSystems, a banking history database, which can make it harder to open a new account elsewhere for up to five years.

Banks may also send your negative balance to a collection agency if you don't pay it. The amount owed is usually small—$50 to $200—but a collection account will damage your credit score and appear on your credit report for seven years.

The fastest way to resolve an overdraft is to deposit money as soon as you notice it. Most banks will reverse one overdraft fee per year if you ask, especially if you've been a customer for a while and this is your first offense. It never hurts to call and request a reversal.

When your bank declines the transaction instead

If you don't have overdraft coverage, or if your bank declines certain types of transactions (like ATM withdrawals or debit card purchases), the transaction will be rejected. Your purchase won't go through, but you may still be charged an insufficient funds fee or NSF fee for attempting it.

This fee is usually smaller than an overdraft fee—often $15 to $25—because the bank didn't actually lend you money. However, if a merchant retries the transaction (common with subscription services or automatic bill payments), it may be declined again, triggering another fee.

To avoid this, monitor your balance before making large purchases, set up account alerts through your bank's app or website, or link overdraft protection to a savings account so transactions don't bounce.

Overdraft fees and your credit score

An overdraft fee alone does not hurt your credit score. Credit bureaus only see information reported by creditors—banks, credit card companies, loan servicers. A single overdraft fee is an internal bank matter and won't appear on your credit report.

However, if your negative balance goes unpaid for 30 to 60 days and your bank sends it to a collection agency, that collection account will be reported to the credit bureaus and will damage your score. A collection account can lower your score by 50 to 100 points or more, depending on your current score.

The damage lasts for seven years from the date the account was first reported as delinquent, even if you pay it off later. Paying the debt stops new damage but doesn't erase the account from your report.

How to avoid overdrafts or recover from one

The simplest prevention is to keep a buffer in your account—$100 to $200 that you don't spend. This cushion absorbs small mistakes and unexpected charges. Many people also set up low-balance alerts through their bank's app, which sends a notification when your balance drops below a certain amount.

If you've already overdrafted, deposit money immediately to stop additional fees from piling up. Then call your bank and ask whether they will reverse the overdraft fee. Many banks will do this once per year for customers in good standing, especially if this is your first overdraft.

If your bank won't reverse the fee, or if you've already used your one reversal, consider switching to a bank that charges lower overdraft fees or offers overdraft protection. Some online banks and credit unions charge $15 to $20 per overdraft instead of $30 to $35, and a few offer no overdraft fees at all if you link a savings account.

Frequently Asked Questions

Can a bank close my account if I overdraft?

Yes. If your account stays negative for 30 to 60 days without payment, your bank can close it. Once closed, you may be reported to ChexSystems, which can prevent you from opening accounts at other banks for up to five years. Deposit money to bring your balance positive before this happens.

Will an overdraft show up on my credit report?

An overdraft fee alone will not appear on your credit report. However, if the negative balance goes unpaid and is sent to a collection agency, the collection account will be reported and will damage your credit score for seven years.

What's the difference between an overdraft fee and an NSF fee?

An overdraft fee is charged when your bank covers a transaction and your account goes negative. An NSF (non-sufficient funds) fee is charged when your bank declines a transaction because you don't have enough money. NSF fees are usually smaller because the bank didn't lend you money.

Can I get an overdraft fee reversed?

Many banks will reverse one overdraft fee per year if you ask, especially if you've been a customer for a while and have no history of overdrafts. Call your bank and explain the situation. There's no may provide, but it's worth asking.

How do I set up overdraft protection?

Contact your bank and ask about linking your checking account to a savings account or credit line. Once set up, the bank will automatically transfer money from the linked account when you overdraft, usually for a small fee or no fee at all. This prevents overdraft fees but requires you to have money in the linked account.