How to Avoid Overdraft Fees: Three Options From the CFPB

The CFPB says many banks and credit unions charge $30 or more per overdraft, and it names three ways to reduce or eliminate those fees: opt out of debit card and ATM overdraft coverage, link your checking account to a savings account, or ask about a line of credit. Fee amounts and rules vary by institution, so check your own account terms.

1. What an overdraft is

An overdraft happens when your account lacks the money for a transaction and the bank pays it anyway. You then owe the amount plus a fee. According to the CFPB's key terms page, this can happen through checks, ATM transactions, debit card purchases, automatic bill payments, and other withdrawals.

A related charge is the non-sufficient funds (NSF) fee. It may apply when a check or electronic payment is not paid because of a lack of funds, which is often called a bounced check.

2. Why the fees add up

From the CFPB's overdraft page:

• Many institutions charge $30 or more per transaction.
• You can be charged for each overdraft, so several fees can land in one day, though some institutions set daily maximums.
• Many also add a fee if you do not repay the shortfall within a few days.
• Balances do not always update right away or in the order you expect, so even careful trackers get caught.

To see the scale, assume a $30 fee (an illustration, not a quote from any bank). Three overdrafts in one day cost $90. One a month for a year costs $360 (12 times $30).

3. Option 1: Opt out of debit and ATM overdraft coverage

Your bank cannot charge overdraft fees on ATM and most debit card transactions unless you agreed ("opted in"). If you have not opted in, a purchase or withdrawal is generally declined when the funds are not there, and you pay no overdraft fee.

The CFPB's 2017 archived article reports a 2014 finding: opted-in accounts were three times as likely to have more than 10 overdrafts a year, and had seven times as many overdraft fees as accounts that had not opted in. That is archived content and may be outdated, but it shows the direction.

Two limits: opting out does not stop fees on checks and ACH payments (online bill payments), and a declined card can be awkward at checkout. You can change your decision at any time by telling your bank.

4. Option 2: Link checking to savings

If you overdraw checking, money moves from the linked savings account to cover it. You may pay a transfer fee, but the CFPB says it is usually lower than an overdraft fee.

5. Option 3: Ask about a line of credit

You may be able to link overdraft coverage to a credit card or credit line. There may be a fee when the line is used, plus interest on what you borrow, but the CFPB describes this as still potentially a cheaper way to cover a brief shortfall.

6. Habits that help

The CFPB suggests:

• Track your balance carefully
• Sign up for low-balance email or text alerts
• Know when scheduled electronic payments (rent, mortgage, utilities) will be taken and how much
• Know when deposits become available

The 2017 article adds a point about debit cards: a purchase can be approved when the balance is enough but still cause a fee if the account is negative by the time it settles, for example because a check or bill payment cleared in between. Check your balance before buying, and think about payments still pending.

The same article also suggests comparing fee schedules at other banks or credit unions if you pay overdraft fees regularly.

7. Key takeaways

• Overdraft fees of $30 or more per transaction are common, per the CFPB (page last modified June 2025).
• Debit and ATM overdraft fees require you to opt in; you can opt out any time.
• Opting out does not cover checks or ACH payments.
• Linking savings or a credit line can be cheaper than an overdraft fee, though transfer fees and interest may apply.
• Low-balance alerts and knowing your scheduled payment dates are the cheapest protection.