Are Bank Overdrafts Really Worth It?

Posted on 18th Jul, 2019 by Bonnie

Proper budgeting, in theory, is much easier said than done. In the real world, unplanned expenses can easily come along and throw off your budget in an instant. Instead of overdrafting your account, which can cause your financial institution to charge you overdraft fees, it’s worthwhile to explore your credit options. Luckily, there are ways to avoid them altogether as well as alternatives to help you pay your bills and get by until the next paycheck.


How Do Overdrafts Work?

If you try to make a debit purchase and the charge exceeds the available balance in your checking account, one of two things can happen. First, your bank can simply deny the charge. Or, the bank covers the transaction, and depending on the institution and type of account you have, you may receive a fee. This additional charge is an overdraft fee.

An overdraft fee is charged to your checking account each time a purchase exceeds the available balance in your account. Fees vary widely, but most banks with overdraft fees charge at least $25 per transaction, though there may be limits to the number of times a bank may post this fee to your account per day.1 While some financial institutions offer programs such as overdraft protection that help reduce or eliminate such fees, others may actually charge extended overdraft fees which apply to overdrawn accounts that have been in the negative for several consecutive days.

Whether or not banks offer the more attractive overdraft protection programs to you will depend on your creditworthiness, which reflects your borrowing, payment and overall credit history. If you can’t secure a checking account with some type of free or affordable overdraft protection, you can still avoid overdrafts altogether.


What Steps Can You Take To Avoid Overdrafts?

It takes a little planning, but you can prevent overdraft fees in the future:

What Are Some Finance Alternatives To Overdrafts?

If you have an upcoming payment, emergency expense or otherwise unavoidable bill that you’ll need more funds to cover, a credit card, line of credit or personal loan are all suitable alternatives. You may still have to pay interest depending on the type of credit you choose, but these longer-term options typically give you more time to repay the funds. Regardless of the method you choose, be sure to carefully review all terms and rates to ensure you’re borrowing responsibly and are familiar with your repayment schedule.




1Tierney, S. (February 12, 2019). Overdraft fees: Compare what banks charge. Retrieved July 8, 2019, from

2Stein, G. (January 19, 2017). Understanding the overdraft “opt-in” choice. Retrieved July 8, 2019, from

3CFPB. (April 6, 2016). My bank/credit union charged me a fee for overdrawing my account even though I never agreed to let them do so. What can I do? Retrieved July 8, 2019, from


About Bonnie

Bonnie is a Chicago transplant who's committed to seeing the world on a dime. As an avid news junkie with an affinity for finance, she loves to help others do more with less.