Explainer
Overdraft, how it works and what it costs
Learn how an overdraft happens, what it costs, and which linked accounts, alerts and bill lists keep your balance from running short.
Satisfy+ Editorial · Published August 13, 2026 · 2 min read
This is general education, not individual financial, investment or tax advice.
At a glance
- What it is
- Your bank pays a transaction your balance can't cover
- What it costs
- Usually a fee, plus repaying the amount
- How it happens
- Checks, card purchases, ATMs, automatic bills
- What helps
- A linked account, a low balance alert, a list of bill dates
An overdraft happens when you don't have enough money in your account to cover a transaction, but the bank pays it anyway. Checks, ATM withdrawals, debit card purchases and automatic bill payments can all overdraw an account. So can other electronic and in-person withdrawals.
What it costs
Many banks and credit unions offer overdraft programs that pay the transaction and charge you a fee. You also repay the overdrawn amount. Banks and credit unions charge different fees for overdraft coverage, so read the terms of your own account.
Why a fresh deposit doesn't always help
A deposit may not be available to use right away. Even if you just made one, a payment can still overdraw your account. Check the available balance, not just the balance, before a large payment goes out.
Debit card overdraft coverage
If you don't opt in to debit card overdraft coverage, you avoid overdraft fees on debit card purchases. If you already opted in, you can cancel it. Opting in lets the bank pay a debit purchase that would overdraw the account and charge you a fee for it. Even with coverage, the bank can still decline the purchase.
Linked accounts and lines of credit
- A linked savings account. Most banks and credit unions will link a savings account to your checking account and move money over to cover an overdraft. There's usually a fee for the transfer.
- An overdraft line of credit. Some banks offer one to people who qualify. You pay a fee and interest on what you borrow.
- A linked credit card. It can cover the difference, sometimes for a fee.
Habits that keep the balance up
Track your balance as carefully as you can. Sign up for low balance alerts through your bank, so you know when you're close. For regular electronic payments, such as a mortgage or a utility bill, know the amount and the day each one comes out.
An annotated example
What to do next
Turn on a low balance alert in your bank's app. List each automatic payment with its amount and the day it comes out, and read your account's overdraft terms so you know the fees.
Keep your account from overdrawing
- Turn on a low balance alert for your checking account
- List each automatic payment with its amount and date
- Check your bank's overdraft terms and fees
FAQ
What is an overdraft?
It's when you don't have enough money in your account to cover a transaction, but the bank pays it anyway, usually for a fee.
How can I avoid debit card overdraft fees?
Don't opt in to debit card overdraft coverage, or cancel it if you already opted in.
Sources
Checked October 19, 2026
- Consumer Financial Protection Bureau. What is an overdraft? (2024)
- Consumer Financial Protection Bureau. How can I avoid debit card overdrafts? (2024)
- Consumer Financial Protection Bureau. If I opted into debit overdraft, can the bank or credit union still decline a debit purchase if it would overdraw my account? (2024)
- Budget
