An overdraft fee is a charge a bank applies when it covers a payment or withdrawal that your account does not have the money for, letting the transaction go through while pushing your balance negative. In the United States the fee is typically about $35 per overdraft, several can be charged in a single day, and after a 2024 federal cap was repealed in 2025 there is no national limit on it.

The mechanics matter because overdraft is one of the most common and least understood bank charges. Knowing what triggers a fee, and what rights you already have, is the difference between an occasional annoyance and a recurring drain.

What triggers an overdraft fee

When you try to spend or withdraw more than your available balance, your bank faces a choice: decline the transaction, or cover the shortfall and let your balance go negative. If it covers it, it typically charges an overdraft fee. The fee is applied per item, so two or three payments that each push you below zero on the same day can each draw their own separate fee.

A key protection is often missed. For everyday debit-card purchases and ATM withdrawals, a bank may charge an overdraft fee only if you have affirmatively opted in to overdraft coverage for those transactions. That rule comes from Regulation E, which implements the Electronic Fund Transfer Act. If you have not opted in, a debit-card payment that would overdraw your account is simply declined at no charge. The opt-in rule does not extend to checks and recurring automatic payments such as ACH bill payments, where a bank can cover the item and charge a fee regardless.

There is also a close cousin to the overdraft fee. A nonsufficient funds, or NSF, fee is charged when the bank refuses the payment and returns it unpaid, rather than covering it. The practical result for you is similar, a fee plus an unpaid bill, but the two are triggered by opposite bank decisions.

How much overdraft fees cost

The Congressional Research Service notes that banks offering overdraft typically charge a fee for covering each overdraft, often around $35. That figure is a common industry level rather than a legal standard, and it varies by institution. Many banks reduced their overdraft fees or eliminated them during 2021 and 2022 under public and regulatory pressure, and some now offer small buffer amounts or a same-day grace period to bring the balance positive before a fee lands.

The aggregate numbers are large. The Consumer Financial Protection Bureau reported that consumers paid more than $5.8 billion in overdraft and NSF fees in 2023. When the bureau proposed capping the fee, it estimated the change could save consumers up to $5 billion a year, which it framed as about $225 for each household that pays these fees. Those were the regulator's own projections for a rule that did not take effect.

The federal cap that was repealed

For a brief period it looked as though a national ceiling was coming. The CFPB finalized a rule on December 12, 2024 that would have required banks and credit unions with more than $10 billion in assets to either cap the overdraft fee at $5, set the fee to cover only their costs and losses, or treat the overdraft as a loan with the interest-rate disclosures that come with credit. The rule was scheduled to take effect on October 1, 2025.

It never did. Congress passed a resolution under the Congressional Review Act to overturn the rule, and President Trump signed it into law on May 9, 2025. Because the rule was nullified before its effective date, no $5 cap ever applied. The Congressional Review Act also bars the CFPB from issuing a substantially similar rule unless Congress specifically authorizes one in future legislation. The result, as of 2026, is that there is no federal cap on overdraft fees, and each bank sets its own. Banks remain subject to the general prohibition on unfair, deceptive or abusive practices, and to state law, but not to a numeric limit.

How to keep overdraft fees down

Several steps are within a customer's control, and they are factual options rather than advice. The first is the opt-in setting: because debit-card and ATM overdraft coverage is optional, you can ask your bank to turn it off, after which those transactions are declined instead of charged. Many people prefer a declined card at the register to a $35 fee. Second, linking a savings account or a line of credit to your checking account usually lets the bank cover a shortfall by transferring your own money, often for a smaller fee or none. Third, low-balance alerts by text or app give you warning before a payment overdraws the account.

It also helps to understand how banks earn from these services; our explainer on how banks make money sets out where fee income sits alongside lending. And because repeated overdrafts can signal a thin cash cushion, the case for an emergency fund is partly a case for never needing overdraft coverage at all.

The bottom line

An overdraft fee is the price of letting a payment clear when your balance cannot cover it, typically around $35 and with no federal cap in 2026 after the 2024 rule was repealed. The most useful facts are that debit-card and ATM coverage is opt-in, that an NSF fee is the mirror image when a payment is declined, and that turning off optional coverage, linking a backup account and setting balance alerts are the levers a customer actually holds.