Overdraft fees and how to avoid them

What’s an overdraft?

An overdraft happens when you spend more than what’s in your account. Your bank may cover the difference and then charge you an overdraft fee (show meaning)Overdraft feeA fee your bank may charge when you spend more than what's in your account and the bank covers the difference.More in the glossaryClose. If a small purchase causes the overdraft, the fee can cost more than the purchase.

You can turn it off for debit cards and ATMs

For everyday debit card (show meaning)Debit cardA card that takes money straight out of your checking account when you pay. It's not a loan like a credit card.More in the glossaryClose purchases and ATM withdrawals, your bank can only charge an overdraft fee if you agreed to overdraft coverage. That’s called “opting in.”

If you don’t want it, call your bank or check your account settings and ask to turn it off. Then, if you don’t have enough money, the purchase is just declined. That can be embarrassing, but there’s no fee.

This doesn’t cover checks or automatic bill payments. Those can still overdraw your account, so keep an eye on your balance when they’re due.

Other ways to avoid overdrafts

• Turn on low-balance alerts. Most banks can text or email you when your balance gets low.
• Check your balance before big purchases.
• Time your automatic payments for just after payday.
• Ask about linking your savings account. Some banks will move money from savings to cover a shortfall. Ask if there’s a fee for that.

Already charged?

Call your bank and politely ask them to refund the fee, especially if it doesn’t happen often. Some banks will say yes.