Your Guide to 

Preventing and 

Managing

Overdraft Fees

2

1

FEDERAL DEPOSIT INSURANCE CORPORATION

To learn more about how to contact your bank’s federal 

regulator, call the FDIC’s Consumer 

Assistance Line at 1-877-ASK-FDIC 

(1-877-275-3342).

www.fdic.gov/consumer

What should I do if I have a 

problem?

If you have a concern about your account, 

contact your financial institution. Explain the 

problem and how you would like to see the 

problem resolved. If contacting the bank does 

not produce desired results, you can contact 

the bank’s federal regulator for assistance. 

To learn more about smart ways to manage your money, complete the FDIC Money 

Smart financial education program online 

through www.fdic.gov/moneysmart. You can 

also find financial education workshops or 

individualized counseling in your area.

Checks and Other 

Transaction Account 

Payments

For other transactions that would cause you 

to exceed your balance, such as if you write 

a check that overdraws your account or for 

recurring bills automatically deducted from 

your account, your bank can choose whether 

to “pay” (cover) the transaction that would 

cause you to exceed your balance. If the 

bank decides it will cover the transaction, 

expect it to charge you an overdraft fee, 

which may average around $30. If the bank 

decides not to cover the transaction, it may 

charge you a “non-sufficient funds” (NSF) 

fee and the merchant also may charge you a 

returned check fee. 

Two Ways to Avoid Costly Overdraft Fees in Automated Overdraft Programs

You can protect yourself from costly overdraft fees by:

1. Watch Your Balance. Track the money 

you deposit into and with draw from your account. You can do this on a paper check register or electronically. Remember to track ATM 

withdrawals, purchases you make with your 

debit card, bills that get debited electronically 

from your account, and checks. It also may be 

a good idea to keep a cushion of funds in your 

account to help prevent unintended overdrafts.

2. Link Your Checking Account to a 

Savings Account. If the accounts are linked 

and you do not have enough money in your 

checking account to cover a transaction, the 

bank will transfer funds from your savings 

account to your checking account to cover 

the difference. This can save you money over 

other overdraft programs because most 

banks will only charge you a small fee, if they 

charge at all, for transfers. But, this option is 

useful only if you have enough money in the 

linked savings account to cover the transaction. Otherwise, ask your bank about other 

less costly alternatives to over-draft payment 

programs, such as a linked line of credit or 

affordable small-dollar loan.

FDIC-005-2011
An overdraft can occur 

when you try to spend more 

money than you have avail-

able in your checking account. 

For example, let’s assume you 

have $40 in your account. 

You ask the phone company 

to electronically deduct $35 

from your checking account 

to pay the bill. You now have 

$5 available. Next, you use 

your debit card to make 

a $10 purchase. You could 

overdraw your account if the 

bank allows the $10 purchase 

to be processed. This could 

cost you expensive overdraft 

fees. The amount you are 

overdrawn plus your bank’s 

fees will be deducted imme-

diately, in full, from your next 

deposit(s) -- including from 

payroll deposits made by your 

employer, government benefit 

deposits, and other direct 

deposits on which you may 

depend. These deductions will 

lower your account balance 

once again and may increase 

the risk of more overdrafts 

and costly fees.

ATM and Point of 

Sale Debit Card 

Purchases

In 2010, federal regulations took 

effect that provide certain pro-

tections for bank customers 

when their deposit account(s) are 

overdrawn. Customers now have a 

choice whether to opt-in to a bank’s 

overdraft program. By choosing to optin, the bank can charge you a fee to process point-of-sale (POS) or ATM 

transactions that exceed your account balance.

Avoid 

Overdraft 

Fees

This is called the “opt-in rule” – if you do not opt in, the bank will decline your 

ATM withdrawals and debit card transactions at POS terminals if you do not have 

enough money in your account to cover the withdrawal or purchase. If you do not 

opt-in but the bank pays an ATM or POS item when your account is overdrawn, the 

bank cannot charge you an overdraft fee.