Banking Checking Accounts

How To Avoid Overdraft Fees at Your Bank

Monitoring your account balance regularly and setting up low balance alerts are just a couple of ways to avoid overdraft fees.

By Danielle Letenyei
and Lauren Graves

Edited by Melinda Sineriz, ABFP™

Updated Feb. 25, 2025

When you make a purchase or withdrawal from an account that doesn't have enough money to cover it, your bank will usually decline the transaction — unless you've opted in for overdraft coverage. If you opt into overdraft coverage, your bank or credit union might decide to cover transactions that would lead to a negative balance for you, at its discretion, but this often means being charged an overdraft fee.

While overdraft coverage can protect you from the embarrassment (and inconvenience) of having transactions declined, it can cost you. Overdraft fees can be over $35 per transaction and be charged multiple times in one day if you try to make more than one purchase.

Let's look at options to avoid overdraft fees and keep that money in your account, including using one of the best checking accounts that doesn't have overdraft fees.

What is an overdraft fee?

An overdraft fee is a fee many banks and credit unions charge if the amount of a purchase or withdrawal exceeds the balance of your checking account, but the institution decides to cover the transaction on your behalf. Legally, you must opt into overdraft coverage services to be allowed to overdraw your account and be charged. If you haven't, you can't be charged an overdraft fee. Overdraft coverage is often referred to as a type of loan because you temporarily borrow money from your institution until you can replace the funds.

Overdraft fees are often about $35 per transaction, according to the FDIC. If you don't opt in for overdraft coverage, you could still face fees for non-sufficient funds (NSF). NSF fees are charged when an item is returned unpaid because your account is overdrawn. This typically applies to bounced checks and scheduled payments for things like bills.

Editor's note

The Consumer Financial Protection Bureau finalized an overdraft rule in 2024 that will limit overdraft fees to $5 per transaction at institutions with more than $10 billion in assets. If the rule takes effect in October 2025 as planned, the change is expected to save consumers over $5 billion in overdraft fees each year.

What is overdraft protection?

The best banks don't charge overdraft fees, and many provide a service known as overdraft protection to all customers. With overdraft protection, you can link another bank account to your checking account to serve as a buffer when you're low on funds.

If you attempt to overdraw the main account, overdraft protection will kick in to automatically pull the necessary cash from your linked account. Some banks still charge a fee for this, often referred to as an overdraft transfer fee, but these are usually much lower than standard overdraft fees (for example, a transfer fee might be around $12, while a standard overdraft fee would be $30 or more).

It's also become very common for institutions — especially online banks and fintechs — to offer fee-free overdraft protection.

5 ways to avoid overdraft fees

Overdraft fees can add up and cause significant strain on your finances. Thankfully, there are things you can do to help you avoid overdraft charges.

Monitor your bank accounts

If you monitor your checking account on a regular basis, you'll know how much you can spend or withdraw from your account without getting overdrawn and incurring a fee. For example, if you only have $100 in your account, you can't spend $150 at the grocery store unless you want to pay even more in overdraft fees.

It's especially important to monitor your account balances if you have set up automatic payments for your bills. It's easy to forget a payment you've scheduled and accidentally overspend.

Use a budgeting app

Many budgeting apps can help you monitor both your bank balances and spending. Most support linking with your banking accounts so you can see how much money you have coming in and going out, and some also include features like low-balance alerts. Using a budgeting app, you can also set spending limits for yourself and see what you have left to spend in each category. This can remove the guesswork of "do I have enough for that?" and let you know where you might be at risk of overdoing it. For keeping your spending in check, we recommend You Need A Budget (YNAB) and Quicken Simplifi.

Rocket Money and Hiatus are two of our favorite budgeting apps that can help you save on your expenses. Rocket Money breaks your spending down and includes low-balance alerts to help you avoid overdraft fees, in addition to offering subscription management and bill negotiation features not offered by most budgeting apps. Hiatus also provides subscription tracking and optional support with canceling services you don't use, and it includes insights about how to save on your bills and an uncluttered interface for tracking your expenses.

Both of these offer free plans, but the paid versions give you full access to features.

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Opt into overdraft protection

Overdraft coverage is voluntary, and we only recommend opting into it if you also sign up for overdraft protection. Opting into overdraft coverage without the protection of a linked account can lead to paying overdraft fees.

Many banks will let you connect a savings account, money market account, or even another checking account to your bank account to cover charges or withdrawals beyond your balance. Many banks don't charge for making these transfers, but make sure to read the fee schedule for your institution to see if it does.

Warning

Your bank may also offer an overdraft line of credit to cover overdraft charges. However, we don't recommend this because a line of credit is similar to having a credit card, and you may be charged interest on top of any fees assessed.

Set up alerts for low balances

Most financial institutions enable you to set up alerts that notify you when your account balance gets low. You can set the balance amount at which the bank sends you a notification via either email or text. For example, you set your account's low balance alert to automatically notify you when your account's available balance reaches $100 or lower.

Choose a bank without overdraft fees

More and more banks are choosing not to charge overdraft fees to their customers. So, if your overdraft charges are getting out of hand, consider moving your money to an account with no monthly fees (as many of these have no overdraft fees).

Banks without overdraft fees

If you are looking to transfer your money to a financial institution that doesn't charge overdraft fees, here are four options we suggest.

SoFi Checking and Savings

SoFi® is one of the best online bank ing institutions that offers high-yield checking and savings accounts. It offers overdraft coverage of up to $50 without fees.¹ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A.  The 30-Day Evaluation Period refers to the "Start Date" and "End Date" set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the "30-Day Evaluation Period"). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY.  Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage. However, you will need to have a monthly direct deposit of at least $1,000 to be eligible for the overdraft coverage. Member FDIC.² SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/sidpterms">SoFi.com/banking/fdic/sidpterms</a>. See list of participating banks at <a href="http://sofi.com/banking/fdic/participatingbanks">SoFi.com/banking/fdic/participatingbanks</a>.

Visit SoFi®| Read our SoFi review

Chime®

Chime is not a bank but a fintech company.³ Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC.  It doesn't charge many of the fees traditional banks charge, including overdraft fees.⁴ There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account. With Chime's SpotMe® Fee-Free Overdraft service, eligible members are covered up to $200 without fees or interest on debit card purchases and cash withdrawals. To be eligible to enroll in the coverage, you must have a monthly deposit of at least $200. SpotMe limits start at $20 and can be increased up to $200.⁵ SpotMe® for Credit Builder is an optional, no interest/no fee overdraft line of credit tied to the Secured Deposit Account; SpotMe on Debit is an optional, no fee service attached to your Chime Checking Account (individually or collectively, “SpotMe”). Eligibility for SpotMe requires $200 or more in qualifying direct deposits to your Chime Checking Account each month. Qualifying members will be allowed to overdraw their Chime Checking Account and/or their Secured Deposit Account up to $20 in total, but may be later eligible for a higher combined limit of up to $200 or more based on member’s Chime account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your SpotMe Limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your SpotMe Limit. Your SpotMe Limit may change at any time, at Chime or its banking partners’ discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions or OTC cash withdrawal fees at retailers. SpotMe won't cover non card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. <a href="https://www.chime.com/policies/">SpotMe on Credit Builder Terms and Conditions</a>. Chime is FDIC insured through its partner banks, The Bancorp Bank and Stride Bank.

Visit Chime | Read our Chime review

Capital One 360

Capital One 360 offers one of the best checking accounts that doesn't charge overdraft fees. However, overdraft transactions are usually declined unless you opt-in to its no-fee overdraft service. You can also set your account to automatically transfer funds from a Capital One savings or money market account to cover overdraft transactions with no fees. Member FDIC.

Visit Capital One | Read our Capital One 360 review

Discover

Discover's Cashback Debit checking account has no overdraft fees. You can set up overdraft protection by automatically transferring funds from a Discover savings or money market account. Plus, with the account, you can earn up to 1% cashback every month on purchases up to $3,000⁶ See website for details. . Member FDIC.

Visit Discover | Read our Discover review

FAQs

Is there any way to avoid overdraft fees?

Yes, there are several ways you can avoid overdraft fees. You can regularly monitor your account and set up notifications for when your account balance dips to a certain amount. Some banks also enable you to automatically cover overdraft charges from a connected savings or money market account for no fees.

Another option to avoid overdraft fees is to opt out of your bank's overdraft protection service altogether. While this means your purchases may be declined, it can save you from paying costly overdraft fees.

Can I get an overdraft fee waived?

In some cases, you may be able to get your bank to waive an overdraft fee. Whether the bank is willing to waive an overdraft fee depends on the bank. You also may have a better chance of getting a waiver if you don't regularly make overdraft transactions.

How long can an account be overdrawn?

How long your account can be overdrawn or in overdraft while remaining open depends on your institution, but many banks may decide to close your account if your balance is negative for more than 30 days. At this point, your account could be sent to collections.

You might also be able to overdraw your account for a short period of time without being charged fees. Checking accounts often include grace periods for overdrafts, during which you can bring your balance positive to cover an overdraft without incurring fees. Grace periods are typically just 24 hours or until the end of the next business day, so this option is best if you rarely overdraw your balance and can quickly pull the funds from elsewhere when it happens.

Bottom line

Overdraft coverage sounds like a good thing to have, but it could cost you more in overdraft fees than it actually helps you. To avoid overdraft fees, we recommend banking with institutions that don't charge them at all, closely monitoring your account's balance, using a budgeting app to keep an eye on your transactions and spending limits, and signing up for overdraft protection by linking another account.

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SoFi Checking and Savings Benefits

Earn up to 3.80% APY⁷ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/2026. See full bonus and annual percentage yield (APY) terms at <a href="http://www.sofi.com/banking#1">sofi.com/banking#1</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC. SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Jan. 24, 2025. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a>. See the SoFi Plus Terms and Conditions at <a href="https://www.sofi.com/terms-of-use/#plus">https://www.sofi.com/terms-of-use/#plus</a>. and collect up to a $300 cash bonus with direct deposit or $5,000 or more in qualifying deposits⁸ SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Jan. 24, 2025. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a>. See the SoFi Plus Terms and Conditions at <a href="https://www.sofi.com/terms-of-use/#plus">https://www.sofi.com/terms-of-use/#plus</a>.
No account, overdraft, or monthly fees⁹ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at <a href="http://sofi.com/legal/banking-fees/">sofi.com/legal/banking-fees/</a>
Get your paycheck up to two days early¹⁰ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.
Access additional FDIC insurance up to $3 million² SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/sidpterms">SoFi.com/banking/fdic/sidpterms</a>. See list of participating banks at <a href="http://sofi.com/banking/fdic/participatingbanks">SoFi.com/banking/fdic/participatingbanks</a>.

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