Despite expectations that banks would eliminate overdraft fees, they continue to be costly burden for many consumers, according to Consumers’ Checkbook, an online comparison website for services.
Last year, the average overdraft fee was $26.77, only a 1 percent dip from the $27.08 average in 2024, according to the latest checking account survey by Bankrate.com. Ninety-four percent of the account options Bankrate studied still charge a fee when accounts have a negative balance.
In 2024, the Consumer Financial Protection Bureau, or CFPB, announced a rule that would have limited overdraft fees to $5. Faced with increasing public concern about “junk fees,” some major banks voluntarily changed their overdraft policies, lowering their fees, offered grace periods, or eliminating their fee.
But, in 2025, Congress killed that regulation, and consumers continue to pay more than $12 billion a year in fees.
“The death of overdraft fees was greatly exaggerated,” said Ted Rossman, Bankrate’s principal analyst. “At some banks you’re still paying $25, $30, or even $35 per overdraft. Overdraft fees are not dead.”
Financial institutions make billions from penalty fees
Banks and credit unions earn significant revenue from overdraft and nonsufficient funds, or NSF, fees, according to a report from the National Consumer Law Center, or NCLC, an advocacy group. The total could exceed $12.4 billion in 2025, up from an estimated $12.1 billion in 2024.
These fees are mostly paid by “economically disadvantaged households, which have lower incomes and lower credit scores and are more likely to incur multiple fees,” the report said. Black and Latin households are more likely to incur overdraft fees than White households.
“Overdraft fees are just a revenue machine for banks, and they are now looking to increase those profits on the back of struggling families,” said Lauren Saunders, an NCLC senior attorney who co-authored the report. “If banks want to give people small-dollar loans as an affordable way to bridge shortfalls, they can do that, but they should do it honestly, rather than gouging them on the back end with overdraft fees.”
NCLC’s analysis found that overdraft revenues at the top 20 banks rose 4.2 percent in 2025 compared with 2023. JP Morgan Chase topped the list with $1.1 billion in earnings from overdraft fees, followed by Wells Fargo, $924 million, and PNC Bank, $279 million.
A few banks had double-digit increases in overdraft revenue between 2023 and 2025: Huntington Bank, 40 percent; M&T Bank, 36 percent; Citizens Bank, 24 percent; First Citizens, 23 percent; and TD Bank, 22 percent.
USAA Federal Savings Bank, which largely serves the military community, introduced overdraft fees in late 2023 and has seen its overdraft revenue jump 471 percent since then, according to the report.
Congress killed limits on overdraft fees
The CFPB’s 2024 rule ordered the largest U.S. banks to cap overdraft fees at $5, which was based on the actual cost of handling those types of transactions. The rule allowed banks and credit unions to charge more if they could prove that their actual costs exceeded $5.
The CFPB estimated that its rule would save U.S. consumers about $5 billion annually. The average savings for a family that paid overdraft fees would have been about $225 per year.
The nation’s bankers opposed the rule from the beginning. They said that overdraft protection was a service their customers wanted and valued, and that additional government regulations were unnecessary.
Rob Nichols, president of the American Bankers Association, or ABA, a trade association, claimed a government cap on overdraft fees would make it “almost impossible” to provide overdraft protection to customers.
“Consumers have repeatedly made clear that they understand and value access to this highly regulated service and do not want to lose it due to government-imposed price controls,” the ABA said in a statement to Consumers’ Checkbook.
The ABA refers to its most recent survey on overdraft protection, released in March 2025, that showed “a strong majority of Americans value overdraft protection and want it to remain an option.”
Because Congress killed the CFPB’s overdraft-fee cap in 2025, financial institutions can charge anything they want. And since then, their revenue from fees has increased.
Some banks still have customer friendly overdraft policies
Despite the ABA’s insistence that banks can’t afford to cap their overdraft fees, several large institutions have capped or eliminated them:
Capital One eliminated all overdraft fees in 2021. Customers who enroll in the bank’s ”Fee-Free Overdraft Protection Service” won’t be charged if a transaction is approved but there isn’t enough money in the account to cover it.
Chase doesn’t charge its $34 overdraft fee if an account is overdrawn by $50 or less at the end of the business day, or if it’s overdrawn by more than $50 and the account is brought back into balance or is overdrawn by $50 or less at the end of the next business day.
Wells Fargo gives account holders a 24-hour grace period before charging overdraft fees.
Bank of America dropped its overdraft fee from $35 to $10 in 2022.
Many online banks never charged overdraft fees or eliminated them before the biggest brick-and-mortar banks changed their policies:
Ally Financial, which had never charged overdraft fees on debit card transactions, eliminated all overdraft fees in 2021.
Chime offers an overdraft service called “SpotMe” that allows qualifying members to make a debit card transaction that exceeds their balance by up to $200 with no fee.
Other ways to avoid overdraft fees
If your bank or credit union charges overdraft fees, and you don’t want to switch financial institutions, which is time consuming and stressful, here are four steps to avoid getting into a penalty situation:
1. Decline optional overdraft coverage. If you decline this service, debit card purchases and ATM transactions that would put your account in the red are declined without a fee. This may be embarrassing at the checkout counter, but you won’t end up paying $35 for a $5 cup of coffee.
If you’re unsure what you signed up for when you opened your account, ask your bank:
“What happens if I use my debit card to make a purchase and I don’t have enough money in my account? Is there a fee, or will the transaction be declined?”
Declining overdraft protection doesn’t eliminate NSF fees for bounced checks.
2. Set account alerts. Get notified by text or email when your balance drops below a set threshold, giving you time to add funds before you overdraw. You can set this up online or through the financial institution’s mobile app.
3. Link your accounts. Link your checking account to a savings account, credit card, or a line of credit to automatically cover any shortfalls. Most banks don’t charge fees for overdraft protection transfers from a linked savings account, but they may charge a small fee for credit-based transfers. However, it’s still cheaper than the average overdraft fee.
4. Be vigilant if you enroll in auto pay. Auto pay is convenient and a great way to avoid late payments, but if you use the service, make sure your checking account has enough funds to cover your bills.
Tip: If you slip up and overdraw your account for the first time, contact customer service to see if they’ll waive the fee. Then deposit money into your account, as some institutions charge multiple overdraft fees if an account is overdrawn on several transactions on the same day.
Frequent overdraft fees are a warning sign
Most overdraft and NSF fees, 79 percent, are paid by about 9 percent of accounts, according to CFPB data. In many cases, these accountholders are intentionally spending money they don’t have in their checking accounts. They’re using it as a form of credit, but it’s an expensive way to bridge the financial gap.
“These are more vulnerable households to begin with, so if you have 10 $30 overdraft fees in a year, that’s $300,” said Bankrate’s Rossman. “This can definitely add insult to injury.”
If you frequently overdraw your account or write checks that bounce, it’s time to get help from a nonprofit credit counselor, Consumers’ Checkbook advises.
“Overdrafting raises massive red flags about a household’s financial stability, and if it has become part of your financial life, you should get help right away,” said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling, or NFCC.
McClary said the billions of dollars spent on overdraft fees highlighted by NCLC report reflect the growing reality that Americans are running out of options to stretch their budgets.
You can find a certified non-profit credit counseling agency at NFCC.org. The first meeting is free.
