tips for avoiding overdraft fees


Woman online shopping with her debit card.

Overdraft fees can be expensive, difficult to pay off, and may leave you in poor standing with your financial institution. Fortunately, many options are available to protect your account from overdrafting.

what are overdraft fees?

Overdraft fees occur when a transaction is processed by your bank, even though you don’t have enough money in your account to cover it. For example, if you had $40 in your checking account and made a $50 purchase with your debit card, you'd end up overdrafting by $10.

When this happens, the purchase is still approved by your financial institution, although you don’t have the appropriate funds. This results in a negative balance and an overdraft fee from your provider. Some overdraft fees can be up to $50 per transaction – turning what should have been a $50 transaction into a $100 transaction!

The exact cost of overdraft fees varies and depends on your financial institution's policy; however, they typically range between $35 – $50. Understandably, most people want to avoid these unwanted fees whenever possible – especially when they’re charged for every negative transaction!

Continue reading for helpful tips and tricks on preventing the hassle of overdrafting:  

1. link your accounts for overdraft protection

Most financial institutions offer overdraft transfers – where funds from a linked savings account are used for overdraft protection. If you make a purchase and there isn’t enough money in your checking account to cover it, the amount you need will automatically be transferred from your savings. Keep in mind, some banks will also charge a small fee for each overdraft transfer. However, it will likely be much lower than the overdraft fee you would’ve been charged. You can also link your account to an overdraft line of credit or credit card. This will allow you to avoid the transfer fee, although you would be responsible for any interest accrued.

2. deposit money into your account quickly

It’s possible to avoid overdraft fees after a purchase has been made with insufficient funds. The easiest way is to deposit money into your account to cover the purchase before the payment is applied. Most financial institutions offer a grace period or deadline to deposit funds before they charge anything. In these scenarios, overdraft solutions are a convenient way to protect yourself against high nonsufficient fund (NSF) fees and the embarrassment associated with “bounced checks.”

If you don’t make the cutoff time and are still charged an overdraft fee, try to get your account to a positive balance as quickly as possible. Some providers will charge an extended overdraft fee for negative accounts over a lengthy amount of time. Accumulating additional fees will only make your negative account more challenging to pay off.

pro tip: Every financial institution will have a different policy regarding overdrafting and fees. Make sure that you are caught up on your financial institutions’ rules and policies regarding overdrafts. Better offers include lower fees and a more generous grace period before you’re charged.

3. set up eAlerts

Setting up eAlerts that notify you when your account has a negative balance is an excellent way to avoid being charged a fee. Because there’s typically a small window before the fee occurs, this is a great tool to help you get your funds deposited before that happens. You can choose to receive notifications by email or text message and customize them to best fit your needs. At BlueOx Credit Union, eAlerts provide members with the following reminders:

  • Account balances (above or below a specified amount).
  • ACH deposit or withdrawal notices.
  • Loan payments coming due.

pro tip: Ensure you check your accounts regularly – especially if your financial institution doesn’t offer an alert service. Keeping an eye on your accounts will help you discover overdrafts more quickly and avoid fees. Balances can easily be checked through online banking, your mobile app, visiting or calling your branch, or at the ATM.

4. opt out of overdraft coverage

Another way to avoid overdraft fees is by opting out of overdraft coverage from your financial institution. Unfortunately, this means that your transaction will be declined if you don’t have enough funds in your checking account to pay for your purchase or bill – instead of your provider covering it for you. Having overdraft solutions can be beneficial in times of emergency or when the fees you’d acquire from a missed payment are higher. Keep this in mind before opting out of coverage altogether.

pro tip: Opting out of overdraft coverage will not always apply to automatic monthly charges - such as a Netflix or Amazon Prime account. Offline transactions may also still be approved from a stand-in offline limit. Talk to your financial institution about their overdraft coverage terms to gain a better understanding of what opting out includes and how you can avoid unexpected fees.

what’s next

Avoiding overdraft fees is just one way you can protect your money and maintain your financial wellness. For more tips, resources, and educational webinars, check out GreenPath Financial Wellness.

GreenPath has over 60 years of experience helping people build financial health and resiliency. Their NFCC and HUD-certified counselors give you options to manage credit card debt, student loans, and homeownership. Members of BlueOx Credit Union have access to the following:


  • Free Financial Counseling - You have access to free, one-on-one financial counseling delivered by caring, certified experts. They'll help you to understand your situation, learn about options, and make a plan to meet your goals.
  • Debt Management Services - If you have high-interest credit card debt, a GreenPath Debt Management Plan may be able to help lower your interest rates so you can pay off your debt sooner.
  • Housing Services - Take advantage of foreclosure prevention services, homebuyer counseling, rental counseling, and more!
  • Student Loan Counseling - Understand repayment options that can postpone or lower your payments. Learn the pros and cons of each strategy so you can make an informed decision on which is best for you!
  • Credit Report Review - Learn how to read your personal credit report, how a credit score is calculated, and how to improve your score!

Learn more and start your financial health journey today!

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