It’s not always easy to understand overdraft fees. When a transaction drops your checking account balance below zero, what happens next is up to your bank.
A bank or credit union might pay for the transaction or decline it and, either way, could charge you a fee. With some financial institutions, if you make multiple transactions with a negative balance, you are charged multiple fees and could wind up hundreds of dollars in the hole.
You can read more about overdraft coverage programs, and here’s a closer look at what banks charge.
Banks with no overdraft fees
SIMPLE
Simple has no overdraft program, no overdraft fees and no insufficient funds fees (also called nonsufficient, or NSF, fees). So any ATM and one-time debit card transactions that would cause your balance to go negative are declined. The mobile-optimized bank also has no account fees whatsoever and helps curb overspending with its Safe-to-Spend balance, which excludes scheduled bills and savings goals from your available balance.
CHIME
Chime, another nontraditional bank, also doesn’t let you overdraw your account; it has no overdraft or nonsufficient funds fees. Instead, any payments or withdrawals that would result in a negative balance are rejected.
Banks that make it easier to avoid overdraft fees
These four banks offer above-par overdraft policies. Note that although banks may not charge overdraft fees, there may still be penalties.
Capital One 360
Capital One 360 is among the banks and credit unions that offer an overdraft line of credit, meaning you pay interest on just the overdrawn amount, instead of a fixed fee. With Capital One, you can opt into a line of credit with a variable rate, and there’s no fee for signing up. Another option: free transfers from a linked Capital One 360 savings account. You can also add more conventional overdraft coverage at $35 per charge, though that service comes with a one-day grace period to restore your balance to a positive number. If you don’t opt into these services, your transactions will be declined by the bank, with a $9 fee for any returned checks.
Discover Bank
With Discover, you can link a qualifying savings or money market account for free transfers if you don’t have enough cash in your checking account. Otherwise, the bank charges a $30 fee for insufficient funds a maximum of once per day. At other institutions, this type of fee might be charged multiple times in a single day, potentially adding up to hundreds of dollars.
EverBank
The online financial institution EverBank has a personal overdraft line of credit with a variable rate, so you pay interest only on any overdrawn amount. Although there is no fee for signing up, missing a payment on any interest by the given due date results in a late fee of $25. You can also opt into an overdraft protection transfer service by linking an account or line of credit to your checking. Outside of these services, you’d pay a $30 nonsufficient funds fee for transactions that cause overdrafts, except for one-time debit card and ATM transactions.
Schwab Bank
This investment brokerage’s checking account doesn’t have fees for overdraft protection services. When you overdraft with your debit card, Schwab automatically pulls money from your linked Schwab One brokerage account or your Schwab savings account for free. Its overdraft protection doesn’t extend to checks or electronic withdrawals and payments. Those trigger a $25 nonsufficient funds fee, up to $100 a day.
Overdraft fees by bank
| Financial institution | Overdraft coverage fee (per item) | Max fees per day | Total possible cost in a day |
|---|---|---|---|
| Alliant Credit Union | $25 | N/A | N/A |
| Ally Bank | $25 | 1 | $25 |
| Associated Bank | $35 | 4 | $140 |
| Bank of America | $35 | 4 | $140 |
| Bank5 Connect | $15 | 6 | $90 |
| BB&T | $36 | 6 | $216 |
| BBVA Compass | $38 ($32 in Calif.) | 6 | $228 ($192) |
| BMO Harris Bank | $35 | 4 | $140 |
| Boeing Employees Credit Union | $25 | 5 | $125 |
| Chase | $34 | 3 | $102 |
| Citibank | $34 | 4 | $136 |
| Citizens Bank | $35 | 7 | $245 |
| Comerica | $25 (1st time), $33 (2nd-4th times), $37 (5th time) | 5 | $161 |
| Connexus Credit Union | $29.95 | Not specified; up to $300 negative balance | N/A |
| Consumers Credit Union | $30 | Not specified; up to $750 negative balance | N/A |
| Fifth Third Bank | $37 | 5 | $185 |
| HSBC Bank | $35 | 3 | $105 |
| KeyBank | Up to $39 | 5 | Up to $195 |
| M&T Bank | $38.50 | 5 | $192.50 |
| Nationwide | $25 | 6 | $150 |
| Navy Federal Credit Union | $20 | 3 | $60 |
| PNC Bank | $36 | 4 | $144 |
| Regions Bank | $36 | 6 | $216 |
| Santander Bank | $35 | 6 | $210 |
| SunTrust | $36 | 6 | $216 |
| TD Bank | $35 | 5 | $175 |
| Union Bank | $33 | 5 | $165 |
| USAA | $25 | 2 | $50 |
| U.S. Bank | $36 | 4 | $144 |
| Wells Fargo | $35 | 4 | $140 |
Some banks 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 $7 sandwich with $2 in your account, you’d be exempt from a fee.
Other overdraft programs
Outside of the banks without overdraft coverage fees, you can generally find a cheaper overdraft service at your bank called 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 bank’s policy. The cost of this transfer is around $10 or $12, though it can be cheaper.
» Looking for a savings account with low fees and good rates? Read NerdWallet’s list of best savings accounts
Overdraft fees, especially from overdraft coverage, are some of the steepest fees that banks charge. Knowing these fees might help you consider to opt out of the programs or find cheaper overdraft alternatives that your bank offers.
Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.
Updated July 7, 2017.
