When you're already experiencing financial hardship, getting hit with overdraft fees can be devastating, both emotionally and financially. Even when you aren’t facing hard times, an overdraft fee is a nuisance.
Banks may limit the number of overdraft fees they charge in a single day, but even then, the fee can get quite expensive, particularly for people who overdraft regularly. Frequent overdrafters average around 11 overdraft or insufficient funds fees (NSF), according to a 2020 study from research firm Oliver Wyman, and overdraft and NSF fees generate $17 billion annually for banks.
You have options for waiving overdraft fees, though, especially if you don't routinely overspend your checking account. With a better understanding of when banks charge them, you may be able to avoid future overdraft fees. On the rare occasion that you overspend, knowing how to speak to your bank can reduce or even eliminate overdraft fees.
What Are Overdraft Fees?
Your bank charges an overdraft fee when it pays for a transaction even though you don't have enough money in your account to cover the transaction. Overdrafts can happen if you write a check or swipe your debit card for more than the amount you have available in your checking account. Having multiple transactions hit your account on the same day can also put you at risk of incurring multiple overdraft fees.
The median overdraft fee of the top 50 banks by market share is $34, according to the Consumer Financial Protection Bureau.
In some cases, the bank may return the transaction to the merchant and charge you a non-sufficient funds or insufficient funds fee instead of covering the purchase for you and charging an overdraft fee.
How Do Overdraft Fees Work?
Overdraft fees can be quite expensive, costing close to $40 each occurrence, depending on your bank. The fee doesn't have to come as a surprise. Some banks let you enroll in alerts that will notify you by text, email, or mobile notification if your account is overdrawn. You may also spot the fee when you're checking your transaction history online or reading through your billing statement. Your online account may note the transaction that triggered the overdraft fee.
Overdraft fees are charged per transaction, which means your bank could hit you with multiple fees on the same day if you have several transactions posted to your account after you’re overdrawn. Depending on the bank, you could end up with nearly $200 in overdraft fees in a single day.
Your bank may limit the number of overdraft fees you're charged in a single day, which keeps you from being charged an excessive amount of overdraft fees.
Overdraft Fees by Bank
The majority of banks big and small charge overdraft fees, though the amount and maximum number of fees they charge per day varies.
|Bank||Overdraft Fee||Max Fees Per Day|
|Bank of America||$35 on transactions over $1||4|
|Citizens Bank||$37, and an additional $30 fee on the fifth, eighth, and 11th day an account remains overdrawn||5|
How To Get Overdraft Fees Refunded
If you've been charged an overdraft fee, you may be able to get it refunded with just a few steps as long as you're not a repeat offender.
Call Your Bank
Once you notice an overdraft fee has been charged, give your bank a call. You can find the number quickly on the back of your debit card or the bank's website, or in your mobile app.
Make Your Request
Let the bank know that you'd like to have the overdraft fee waived. You can say something like, "I noticed I was charged an overdraft fee on [date] and I'd like to have it removed."
It may help to give the bank some background on what led to the overdraft. For instance, your pay was delayed, a bill was processed sooner than you expected, or you've been experiencing financial hardship.
Use Your Bank History
If you've otherwise been a good bank customer and have avoided overdraft fees so far, bring this up. For instance, you can say, "I've been a good customer for several years and overdrafting is not common for me. Is there something you can do?"
Remember, you're asking the bank to do you a courtesy. Asking nicely goes a long way. Avoid getting angry, even if the customer service rep isn't budging on waiving the fee.
Tips for Avoiding Overdraft Fees
Banks may be less willing to waive your overdraft fee if you've made overspending a habit. There are some ways you can avoid overdraft transactions, saving yourself hundreds of dollars in fees and eliminating the stress of asking for fees to be waived.
- Deposit or transfer funds before the cutoff time: Depositing enough money to cover the pending transactions can prevent you from overdrafting your account.
- Look for a bank that doesn't charge overdraft fees: They may still process overdraft transactions but won't charge you a fee for it.
- Sign up for bank balance alerts: These alerts notify you if your account balance drops below a certain amount, which can let you know you need to make a deposit before that day’s deposit cutoff time.
- Sign up for overdraft protection. This feature transfers money from a linked bank account or credit card to prevent overdraft. Some banks still charge a fee for overdraft protection transfers, but this is typically lower than an overdraft fee.
Overdraft transfers from a credit card may be treated as a cash advance, which typically involves paying a cash advance fee and a higher interest rate than you would for purchases. Cash advance transactions don't have a grace period for avoiding finance charges—interest starts on the transaction date.
Frequently Asked Questions (FAQs)
How many times will a bank reverse an overdraft fee?
Banks waive overdraft fees at their discretion. There's no guarantee they will reverse an overdraft fee.
When are overdraft fees charged?
Overdraft fees are charged when a bank pays a transaction on your behalf because your account balance isn't high enough to cover the transaction. Some banks may not charge the fee until the end of the business day or the next morning, which may give you time to make a cash deposit to your account to cover the overdraft transactions.
What bank has the lowest overdraft fees?
Ally Bank, Capital One, Discover, and USAA don’t charge overdraft fees for debit card transactions. Online banking platform Chime doesn’t charge an overdraft fee if you are overdrawn by $200 or less.
Oliver Wyman. "Beyond Overdraft: A Path to Replacing Unsustainable Revenue," Pages 4-5.
Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting In," Page 1.
Citizens Bank. "Overdraft Options and Fees Info."
Chime. "Fee-Free Overdraft With SpotMe."