Jul 12, 2026
High overdraft fees can come as a nasty shock that costs Americans billions of dollars each year.
If you recall the Consumer Financial Protection Bureau issuing a ruling in December 2024 that would’ve seen most overdraft fees reduced to $5, you’re not misremembering. The rule required banks and credit unions with more than $10 billion in assets to either reduce their fees for overdrafts to $5, charge only the amount that covers their costs or losses, or treat overdrafts like other loans, disclosing their interest rates and giving customers a choice about opening a line of overdraft credit.
Advertisement
The CFPB projected that the rule would save $5 billion annually for Americans, amounting to $225 a year for households that pay overdraft fees.
Thanks for subscribing!
Better banking intel, delivered free.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
But Congress reversed the CFPB’s decision in 2025, before it took effect.
After the CFPB began an initiative to tackle “junk fees” in 2022, leading to its decision, profits that banks made off overdraft and NSF fees dropped by $1.8 billion in 2023 compared to the year prior, a 24% decrease. And they were down a massive $6.1 billion in 2023 compared to 2019, when banks raked in $11.96 billion.
Now, after an act from Congress, banks are back to about that same pre-pandemic levels. In 2025, banks took in about $12 billion from Americans by charging overdraft and NSF fees, according to a National Consumer Law Center report.
How you can avoid overdraft fees
Overdraft fees occur when you don’t have enough money in your account to cover purchases you make. The New York Times reported that the average fee is $27, but can range up to $42.
Some banks can also charge “continuous,” or daily overdraft fees, charges that are assessed every day that your account stays overdrawn, the FDIC says.
For ATM or debit transactions at merchants (online and in person), you have to opt in or agree up front to overdraft fees, otherwise you can’t be charged. Banks often refer to this as “overdraft protection,” and you can opt out of it at any time. The Times also notes that if a transaction can’t be completed because you don’t have enough in your account, and you have opted out of overdraft, you could still be charged an NSF fee, but they are “becoming less common.”
Some banks offer an option to link a savings account to your checking account, so funds can be drawn from savings if you don’t have enough in your checking to cover transactions; there may be fees for this, but the FDIC says they’re typically less than overdraft charges.
If you want to switch to a bank that simply doesn’t charge overdraft fees, Capital One, Citibank, American Express bank and Ally Bank have dropped them, according to the Times.
Advertisement
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Other options to avoid overdraft fees
If you need to overdraft your checking account for an emergency purchase, you could alternatively look for a bank that offers small installment loans (generally less than $1,000), the Times reported.
“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.”
Fintech firms may also have alternatives that work for you. Chime, for example, offers a service called SpotMe that will cover up to $200 in overdrafts, as long as customers have a direct deposit set up from their employer or government benefits program.
You can also be able to set up alerts on your account to let you know if your balance goes below a certain threshold and avoid fees.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
