If you thought bank overdraft fees were no longer much of a problem, think again.
The fees, which banks charge when you overspend your checking account but the bank covers the payment, remain stubbornly high at some banks after a rule limiting the charges was scrapped last year.
The average fee among banks is $27, but charges can be as high as $42, according to Moebs Services, a financial research firm. (About half the purchases or withdrawals that lead to a fee are $50 or less, researchers at the Federal Reserve Bank of New York found.)
A small proportion of customers are responsible for the bulk of overdraft fees, which total billions in revenue to banks. People are more likely to be charged the fees if they have lower incomes, have lower credit scores, are less educated and are nonwhite, federal research has found.
Alex Horowitz, a project director at the Pew Charitable Trusts, said Pew’s research had found that the fees were widely unpopular. “We still see a lot of banks with overdraft fees in the $34 to $39 range,” he said.
Some banks may offer a grace period — say, 24 hours — that allows customers to cover the shortfall before a fee is charged. Additional fees, however, may be charged if the shortfall persists.
Weren’t overdraft fees supposed to decline?
A Biden-era rule that would have set a $5-per-incident cap on most overdraft fees was struck down last year by the Republican-controlled Congress and never took effect. The plan had been projected to save households that spend more than what is in their accounts an average of $225 a year.
As Americans struggle to manage the cost of living, however, some officials are revisiting the impact of bank overdrafts. At a recent Senate Banking Committee hearing on affordability, lawmakers from both parties griped about the fees.
Senator Bernie Moreno, Republican of Ohio, criticized banks that, he said, process bank account withdrawals before deposits, leading to overdraft fees. “It’s crushing working Americans, and it’s fundamentally unfair,” he told Lindsey Johnson, chief executive of the Consumer Bankers Association, a group representing retail banks, at the hearing. “It’s just bad practice.”
Senator Moreno said banks could voluntarily stop such policies or, he said, Congress could enact a law barring them. “Just don’t do bad things,” he told Ms. Johnson.
Bank reshuffling of customer payments, such as by paying larger amounts before smaller ones, can lead to multiple fees for a single overdraft. Reordering payments from “high to low” to maximize the fees was once common but became less prevalent after lawsuits highlighted the practice more than a decade ago.
Still, Senator Chris Van Hollen, Democrat of Maryland, said at the hearing that overdraft fees could be set off by relatively small amounts of overspending. “You can go and get a cup of coffee and not realize that your three-buck cup of coffee ended up getting you a $35 overdraft fee,” he said.
Ms. Johnson, in prepared testimony, defended the overdraft services as “shock absorbers” that can help consumers navigate short-term cash crunches.
Why do banks allow customers to overspend their accounts?
Historically, overdraft coverage was a “courtesy” that banks provided customers when paper checks were the main form of payment, a Pew report from 2025 said. But as debit cards and other forms of electronic payment became popular, overdraft fees surged. Over time, the fees became a significant source of revenue for banks.
Overall revenue from overdraft and related fees at all banks and credit unions rose to an estimated $12.4 billion in 2025, from about $12.1 billion a year earlier, according to a recent analysis by the National Consumer Law Center.
Lauren Saunders, a senior attorney at the center, said the increase suggested that many banks continued to rely heavily on overdraft fees as a moneymaking tool, rather than emphasizing options for customers to avoid them.
“Banks should be helping people manage their money,” Ms. Saunders said, “not making it more difficult.”
Taylor Nelms, vice president of research and insights at the Financial Health Network, a nonprofit that promotes financial well-being, said people could be paying overdraft fees more often because the higher cost of living was leaving them strapped.
“People who incur overdraft fees regularly don’t have liquid savings” to cover their costs, he said.
Among the top 20 banks, JPMorgan Chase, the nation’s largest bank, led with $1.1 billion in overdraft revenue in 2025, the consumer law center found. (The bank’s overdraft fee is $34; it doesn’t charge the fees on overspending of less than $50.) Wells Fargo was next with $928 million, with PNC Bank third at $279 million.
Some banks have moved to adjust their overdraft fees, the center report noted. BMO Bank lowered its fee to $15 from $36 in 2022, but early this year announced it would increase it to $20, while also lowering the overspending cutoff for charging the fee to $20 from $50.
But J.V. Proesel, president of Moebs Services, said he hadn’t seen a rush by banks to significantly raise overdraft fees. “Things have stabilized a little,” he said.
How can I avoid overdraft fees?
To avoid the fees, don’t agree to overdraft “protection,” as banks call it. The service is optional for most transactions.
If you don’t accept the coverage and you spend more than is in your account because of a debit card purchase or an A.T.M. withdrawal, the bank will simply decline the transaction. You could face a “nonsufficient funds” or NSF fee, which some banks charge when they let a payment bounce, but that fee is becoming less common. The 20 largest banks no longer charge them, the consumer law center said.
(Paper checks are an exception to this approach. You can’t opt out of overdraft coverage and avoid fees if you bounce a paper check.)
If you have already “opted in” to receiving overdraft coverage but don’t want it any longer, contact your bank to drop it.
If you prefer to keep the coverage just in case, you can set up alerts on your account so that you will be notified with a text or email if your balance falls below a certain level.
Another approach is to link your checking account to a savings account. If you overdraw the balance in your checking account, money will be automatically transferred from the savings account. There may be a fee, but it’s usually lower than an overdraft fee.
Are there banks that don’t charge overdraft fees?
Some banks reduced or eliminated their overdraft fees in recent years, as scrutiny of the fees increased. Capital One, Citibank, American Express bank and Ally Bank are among those that have dropped the fees. Others offer lower fees. Bank of America, for instance, charges $10 and sets a limit of two fees per day.
Some banks offer small installment loans, typically for less than $1,000, as an overdraft alternative, Mr. Horowitz said. Customers can borrow the money when needed and have a longer time — three to four months — to pay them back. Interest rates are typically lower than with overdraft fees.
“They are much more consumer-friendly than overdraft,” Mr. Horowitz said. But not all banks offer them, he said. “They’re not as profitable as overdraft fees.”
What about start-up bank alternatives?
Some “neo banks” created by financial technology firms offer money management tools that don’t charge fees if you overdraw your account. Chime, for instance, offers eligible customers its SpotMe service, which covers overdrafts of up to $200 at no fee. Customers generally must have a direct deposit from an employer or a government benefits program like Social Security to qualify for SpotMe. The overdraft is deducted from the next deposit.
Chime doesn’t charge an overdraft fee, but it does ask users to pay an optional “tip” after covering an overdraft.
A report in April on SpotMe from the Financial Health Network found that the service was most popular among users ages 25 to 34, and that they were most likely to use it in months when they experienced an expense “shock” of some type.
