While some banks and credit unions have moved away from overdraft charges, many institutions still impose steep fees.
NerdWallet's banking writers regularly analyze dozens of data points from over 100 financial service providers. That research includes overdraft fee amounts.
We dug into our most recent data to determine the average overdraft fee banks charge.
What is the average overdraft fee?
The average overdraft fee amount is $17. That includes providers that allow overdrafts and that don’t charge a fee. If you remove those no-fee financial institutions from the data, the average fee jumps to $27.
What this means is that if a bank charges an overdraft fee, it’s likely going to be high. But there are quite a few banks that are pioneering free overdraft options and flexible policies.
If you’re still paying high overdraft fees, look for ways to reduce or eliminate them.
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Overdraft programs and policies
There is more to overdrafts than just the fee. If a bank offers a checking account, there’s a good chance that it also has an overdraft program.
By “overdraft program,” we mean that the bank allows customers to overdraw their accounts instead of simply declining a transaction that would bring their checking account into the negative.
Even though the ability to overdraft can be useful during a financial emergency, overdraft fees should be avoided as much as possible because they can add up very quickly.
If you keep running transactions without realizing you’ve overdrafted, or if your bank charges a continuous negative balance fee, you could end up paying over $100 in fees over the course of just a day or two.
» Overdraft fees: Compare what banks charge
Average overdraft fee: $17
Overdraft protection options
There are many banks and credit unions that offer overdraft protection. That means that they give you some way of covering an overdraft without being hit with a pricey overdraft fee.
Overdraft protection transfers. One common way to avoid a fee is to opt into overdraft protection transfers. You set up your savings account as a backup for your checking account. If you make a transaction that triggers an overdraft, your bank will pull money from your savings account to cover the cost, thus avoiding a fee. Some places charge a fee for these overdraft protection transfers, but many offer it as a free option.
Grace periods and buffer limits. Some banks take options a step further and give their customers a grace period, where you won’t be charged an overdraft fee as long as you bring your account back into the positive within a set period of time, often within 24 hours. Other banks give customers a buffer amount that you can overdraft up to without incurring a fee, sometimes up to hundreds of dollars.
Overdraft lines of credit. Other banks offer an overdraft line of credit. These lines of credit usually require a credit check and might come with a high APR, but if you’re approved, you can use that line of credit to cover any transactions that would cause an overdraft. Remember that if you rack up interest, an overdraft line of credit can become a pricey option. Similar to a credit card, if you don’t pay it back in a timely manner, you could end up paying much more than your initial overdraft amount.
What can I do to avoid overdraft fees?
Overall, banks have gradually lowered their overdraft fees in recent years. But some have maintained their high fees, and those institutions are the reason why the average cost of overdraft fees isn't lower.
» MORE: Check out the best banks for overdrafts
It’s important to know where your bank stands. If you’re paying overdraft fees, compare alternatives to help you avoid overdraft fees.
