What are Overdraft Fees?

Overdraft fees are charges your bank adds when you spend more money than you have in your account.

Instead of declining the transaction, the bank lets it go through and then charges you a fee for covering the shortfall—sometimes on top of interest or extra daily charges if you stay overdrawn.

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How Overdraft Fees Work

When your balance isn’t enough to cover a payment (like a tap, bill payment, or pre-authorized debit), your bank can:

• Approve the transaction anyway and put your account into the negative

• Charge you an overdraft fee, often a flat amount per use or per day

• Sometimes charge interest on the negative balance until you bring it back above zero

So a small slip like going $20 over can turn into a much bigger cost after fees.

Why Overdraft Fees Add Up So Quickly

Overdraft fees hurt because they are:

• Flat and chunky – the fee doesn’t always match how small the shortfall was

• Repeatable – multiple transactions can trigger multiple fees

• Stacked with interest – if you stay overdrawn, interest may keep ticking in the background

That’s why using overdraft as a regular buffer is usually more expensive than using a small, clearly priced advance or building a small emergency cushion.

How to Avoid Paying Overdraft Fees

• Track your balance regularly in your banking app

• Turn on alerts for low balances

• Keep a small buffer in your main account for bills

The goal isn’t perfection, it’s reducing how often you dip below zero so you’re not paying extra just to use your own money.