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An overdraft fee is often one of the most expensive fees from a financial institution, but not all charge the same amount. And some don’t even have an overdraft fee.
» Looking to lower fees? Jump ahead to
When a transaction drops your checking account balance below zero, a financial institution will choose to reject or cover the transaction. You may be charged fees in either case. The charge for a rejected transaction or check is known as a nonsufficient funds fee, while the charge for an approved transaction is called an overdraft fee. Some providers charge multiple nonsufficient funds or overdraft fees per day if you make many transactions with a negative balance, meaning you could owe hundreds of dollars in penalties.
You can read our . As a rule, it’s best to opt out of overdraft coverage for ATM or one-time debit card transactions if you think you will have issues with overdrafts. When you opt out, the negative debit or ATM transaction will be declined and you won’t be charged a fee.
If not paying your overdraft fees has gotten you placed into , you may want to look into opening a second chance checking account. These accounts are designed to help consumers qualify for a new checking account even with marks on their banking record.
Some providers don’t charge overdraft fees if an account is overdrawn by $5 or less at the end of the business day. So if you buy a $6 sandwich with $2 in your account, you would be exempt from a fee.
If you're looking for financial institutions with no or low overdraft fees, here are a few of our recommendations.
Outside of the financial institutions without any overdraft coverage fees, you can generally find a cheaper option with overdraft protection transfers.
These are opt-in programs that link a second account to your checking account. An overdraft would trigger a transfer from the second account to cover the transaction. The linked account can be a savings account, credit card, line of credit or even another checking account, depending on the provider’s policy. The cost of this transfer is around $10 or $12, although it can be cheaper. Sometimes the service is even free.
» Looking for a savings account with low fees and good rates? Read .
If you’re charged an overdraft fee, here are some ways you may be able to get it waived.
Overdraft fees, especially from overdraft coverage, are some of the steepest fees that financial institutions charge. Knowing these fees might help you decide whether to opt out of the programs or find cheaper overdraft alternatives that your provider offers.
» Want to learn more? Read NerdWallet’s for more on overdraft programs.