An overdraft fee is a charge that your bank imposes when you spend more money than you have in your checking account. This can happen if you write a check, use your debit card, or make a payment that exceeds your available balance.
How Overdraft Fees Work
When you overdraft your account, your bank has a few options:
- Pay the transaction. The bank may cover the transaction, but they will charge you a fee for doing so.
- Decline the transaction. If your bank declines the transaction, it will not be processed, and you will not be charged a fee.
Overdraft Fee Charges
Overdraft fees can vary widely from bank to bank, but they typically range from $25 to $35 per transaction. Some banks also have daily or monthly overdraft limits.
Ways to Avoid Overdraft Fees
Here are some ways to avoid overdraft fees:
- Monitor your account balance regularly. Check your balance online or through your bank's mobile app.
- Set up overdraft protection. This allows you to link your checking account to another account, like a savings account, to cover overdrafts.
- Use a debit card with a PIN. This will help you avoid accidental overdrafts by requiring you to enter your PIN before making a purchase.
- Consider a different checking account. Some banks offer checking accounts that don't charge overdraft fees.
The Bottom Line
Overdraft fees can be costly, so it's important to be aware of them and take steps to avoid them. By monitoring your account balance and using the tips above, you can help protect yourself from these charges.