Information from the Washington State Department of Financial Institutions

Avoiding overdraft fees

An overdraft occurs when a transaction causes your checking account balance to drop below zero.

Your bank or credit union will choose whether to reject or cover the transaction. If they cover the transaction, you may be charged an overdraft fee.

How overdrafts work

Overdraft via checks and ACH 

Generally, if you overdraw your checking account by a check or ACH, your bank or credit union’s overdraft program will pay for the transaction and charge you a fee.

By allowing your account balance to fall below $0, your bank or credit union will also effectively take the repayment right out of your next deposit.

At most institutions, the overdraft fee is a fixed amount regardless of the transaction amount, and you can incur several overdraft fees in a single day.

Overdraft by debit card

Overdraft fees work a little differently for debit cards. Your bank or credit union cannot charge you fees for overdrafts on ATM and most debit card transactions unless you have agreed (“opted in”) to these fees.

If you choose to opt in to debit card and ATM overdraft, you are usually allowed to make ATM withdrawals and debit card purchases even if you do not have enough funds at the time of the transaction. However, you will generally incur fees on transactions that settle against a negative balance later. 

If you have not opted in to ATM and debit card overdraft, debit card purchases and ATM withdrawals will generally be declined if your account doesn’t have enough funds at the time you attempt the transaction

Avoiding overdraft fees

  • Track your balance
    Mobile banking apps and online banking make it easy to track your account balance. Make it a habit to check your account balance on a regular basis.
  • Set up balance notices
    If your financial institution offers account notices via text message or app, consider using it to keep track if you’re getting low on your account.
  • Read the fine print
    Read your financial institution’s overdraft policies. Know the fees they charge and how they charge them.
  • Know when money is deposited in your account
    Know when money that is deposited into your account is available for your use.
  • Know when bill payments come out of your account
    Know when regular electronic transfers, such as rent payments or utility bills will be paid.