Your bank will cover the transaction, then charge you a fee and expect repayment

When you spend more money than you have in your account, your bank can choose to cover the shortfall—this is called an overdraft. The transaction goes through. Then your account balance goes negative. Your bank charges you an overdraft fee (usually $25 to $35 per transaction, though this varies by bank), and you now owe the bank that money plus the original amount you overspent. You have a few days to deposit funds to bring your account back to zero, or the situation escalates.

Not all banks handle overdrafts the same way. Some automatically cover overdrafts if you have opted in to overdraft protection. Others decline the transaction and charge a non-sufficient funds (NSF) fee instead—usually the same amount as an overdraft fee, but the transaction still fails. A few banks do both: they decline the transaction but still charge a fee. Read your account agreement or call your bank to know which applies to you.

Key Takeaways

  • Overdraft fees typically range from $25 to $35 per transaction, and multiple overdrafts in one day can result in multiple fees.
  • Your bank may cover the overdraft automatically, decline it and charge a fee anyway, or offer you overdraft protection linked to a savings account or credit line.
  • If you do not repay the negative balance within a set period (usually 30 to 60 days), your bank may close your account and report you to ChexSystems, making it harder to open accounts elsewhere.
  • Overdraft protection tied to a credit card or line of credit will charge interest on top of any overdraft fee, making the total cost higher.
  • You can opt out of overdraft coverage at any time, which means transactions will be declined instead of covered—avoiding fees but also preventing purchases.

How overdraft fees stack up over time

A single overdraft fee is painful but manageable. The real damage happens when you overdraw multiple times in a short period. If you overdraw by $5 on Monday, your bank charges $30. On Tuesday, you overdraw again—another $30 fee. By Friday, you have paid $150 in fees on a $25 shortfall. Banks do not always process transactions in the order you made them; they may process the largest transactions first, which can trigger more overdrafts than you expected.

Some banks cap the number of overdraft fees they will charge in a single day (often three to five), but not all do. If you are living paycheck to paycheck and your direct deposit is delayed, or if you have multiple automatic payments scheduled close together, overdraft fees can spiral quickly. The longer your account stays negative, the more fees accumulate.

What happens if you do not repay the overdraft

If you leave your account negative for 30 to 60 days without depositing funds, your bank will typically close the account. Before that happens, they will send you a notice—usually by mail—giving you a deadline to bring the account current. Some banks will also try to collect the debt by deducting it from future deposits, though this varies by state law.

Once your account is closed for overdraft, your bank reports it to ChexSystems, a banking history database. This report stays on file for five years. When you try to open a new account at another bank, they check ChexSystems. A negative report makes approval much harder—some banks will refuse to open an account for you at all, or will require you to pay off the old debt first. You may be forced to use a second-chance checking account, which has higher fees and fewer features.

If the overdraft amount is large enough, your bank may pursue collection or small claims court. This is rare for overdrafts under $100, but it happens. A judgment against you can affect your credit score and lead to wage garnishment.

Overdraft protection: what it costs and how to use it

Overdraft protection is a service that links your checking account to another account—usually a savings account, money market account, or credit line—so that if you overdraw, the bank automatically transfers money from the linked account to cover it. This prevents the overdraft fee entirely, but it only works if the linked account has money in it.

If your overdraft protection is linked to a credit card or line of credit, the bank will charge you interest on the transferred amount, typically at a rate of 18% to 25% annually. A $100 overdraft covered by a credit line will cost you roughly $1.50 to $2 per month in interest if you do not pay it back immediately. That is cheaper than a $30 overdraft fee, but only if you repay it quickly.

Overdraft protection is optional. You can request it when you open an account, or ask your bank to add it later. You can also remove it at any time. If you opt out, transactions that would overdraw your account will simply be declined—no fee, but also no purchase.

How to stop overdrafts before they happen

The simplest way to avoid overdrafts is to keep a buffer in your account—money you do not spend. Even $100 or $200 can absorb most mistakes. Set up account alerts through your bank's app or website so you get a notification when your balance drops below a certain amount (usually $50 or $100). Most banks offer this for free.

Track your spending in real time. Do not rely on the balance your bank shows you; that number does not include pending transactions. Pending transactions are purchases you made but have not cleared yet—they can take one to three business days to post. If you spend $50 at a store, the money is not actually gone from your account for a few days, but it is committed. Many overdrafts happen because someone checked their balance, saw $100, and spent $80, not realizing that a $50 pending transaction was about to clear.

If you use automatic bill pay or automatic transfers, schedule them for the day after your paycheck hits your account. Do not schedule them for the same day, because deposits can be delayed. If you have multiple automatic payments, space them out across the month so they do not all hit at once.

Opting out of overdraft coverage

Federal law requires banks to get your permission before charging overdraft fees on debit card and ATM transactions. If you have not explicitly opted in to overdraft coverage, your bank should decline these transactions instead of covering them. However, banks can still charge overdraft fees on checks and automatic bill payments even without your permission, because those are considered different types of transactions.

You can opt out of overdraft coverage entirely by contacting your bank in writing, by phone, or through your online account. Once you opt out, any transaction that would overdraw your account will be declined. You will not be charged a fee, but the transaction will fail—your debit card will be rejected at the store, or the check will bounce. This prevents overdraft fees but can be embarrassing or inconvenient if you are caught off guard.

If you opt out and a check bounces, the merchant or your payee may charge you a returned check fee (usually $25 to $35), which is separate from your bank's fee. So opting out does not eliminate all fees—it just shifts the risk.

Recovering from a closed account and ChexSystems report

If your bank has closed your account and reported you to ChexSystems, you have two options: pay off the debt, or wait for the report to age off.

Paying off the debt is faster. Contact your bank and ask what you owe. Offer to pay in full if possible, or ask if they will accept a payment plan. Once you pay, ask the bank in writing to request that ChexSystems remove the report. Banks are not required to do this, but many will if you have settled the debt. Even if they do not, you can dispute the report directly with ChexSystems by mail or online—though disputes are only successful if the information is inaccurate, not if you simply disagree with it.

If you cannot pay the debt, the ChexSystems report will remain for five years from the date of the negative event. After five years, it automatically falls off. In the meantime, you can open a second-chance checking account at banks that specialize in customers with ChexSystems reports. These accounts usually have monthly fees ($10 to $15), limited check writing, and no overdraft protection, but they allow you to rebuild your banking history.

Frequently Asked Questions

Can my bank charge me multiple overdraft fees in one day?

Yes. If you make multiple transactions that overdraw your account on the same day, your bank can charge a separate fee for each one. Some banks cap this at three to five fees per day, but not all. Check your account agreement or call your bank to find out their policy.

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

An overdraft fee is charged when your bank covers a transaction that would overdraw your account. An NSF (non-sufficient funds) fee is charged when your bank declines the transaction because you do not have enough money. Both fees are usually the same amount ($25 to $35), but the outcome is different: with an overdraft, the transaction goes through; with NSF, it fails.

Will an overdraft hurt my credit score?

An overdraft itself does not appear on your credit report, so it will not directly hurt your credit score. However, if your bank closes your account and reports it to ChexSystems, or if the debt goes to a collection agency, that can indirectly affect your ability to borrow money in the future.

Can I get overdraft fees refunded?

Some banks will refund one or two overdraft fees if you ask, especially if you have been a customer for a long time or if the overdraft was caused by a bank error. Call your bank and explain the situation. There is no may provide they will refund the fee, but it is worth asking. Do this within 30 days of the fee being charged.

What happens if I ignore a negative account balance?

Your bank will send you a notice giving you 30 to 60 days to bring the account current. If you do not, they will close the account and report it to ChexSystems. The debt does not go away—your bank can pursue collection or sue you in small claims court, depending on the amount owed.