Over-The-Top Bank Fees
To avoid outrageous overdraft charges, keep close tabs and weave a safety net.
Paying an overdraft fee on your checking account is like having your mouth washed out with soap: The bank says it's for your own good-but is it really? Just ask Ben Kohler, a 19-year-old Pizza Hut manager who's paying his way through school at Wright State University, in Dayton, Ohio. Kohler has paid hundreds of dollars in overdraft fees. "How do I keep that stupid fee away?" he wonders.
That "stupid fee," which began appearing on account statements about five years ago, is designed to be a convenience and a penalty, banks say. Before overdraft fees, banks and credit unions denied transactions when the account holder didn't have enough money and charged the customer a one-time fee for insufficient funds. Now, a debit or check transaction that exceeds your balance will clear, but the bank charges as much as $35 in addition to the amount you owe for the transaction. And you can end up paying multiple fees if you're not aware that you have a negative balance. Some banks levy additional charges for each day you're in the red.
Overdraft fees "are meant as a deterrent to making payments or writing checks for more than is in your account," says John Hall, of the American Bankers Association. (What's left unsaid, of course, is that the fees go straight to your bank's bottom line.)

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In 2006, consumers paid an estimated $17.5 billion in overdraft fees, according to the Center for Responsible Lending. Consumer groups, which consider the charges usurious short-term loans, want Congress to require banks to get written consent from customers before they are enrolled in accounts that charge overdraft fees and to disclose the fees in terms of an annual percentage rate.
In the meantime, you can avoid the fees by keeping close tabs on your account or using a bank or credit union that doesn't charge them. Unfortunately, the ten largest U.S. banks all levy overdraft fees. But many smaller banks and credit unions don't-just be aware that your debit card will be denied or your check will bounce if you don't have enough money in your account. And you'll still be charged a one-time fee of as much as $35.
Don't be shy about asking your bank to waive its overdraft charge. Banks are willing to do so for good customers who make an occasional mistake.
If you want a safety net, you can link your checking account to a savings account or line of credit. A line of credit typically charges an annual interest rate of 18%, says Leslie Parrish, of the Center for Responsible Lending, but that's cheaper than paying overdraft fees. Banks usually charge $5 to $10 to transfer money from your savings to your checking account.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Trump Targets Student Loan Forgiveness: Here’s How Taxes and Repayment Could Soon Change
Student Loans The so-called One Big Beautiful Bill and the Trump administration’s executive action are making the future of student loan forgiveness and its tax consequences uncertain.
-
California, South Florida, Long Island, New Jersey: The Places People Are Leaving in Droves in 2025
Skyrocketing costs and shifting priorities mean people are packing up and leaving some cities and states in droves, while others are flocking to more affordable or lifestyle-friendly destinations.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online Bargains
Feature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2025
Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?
insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Is Amazon Prime Day? Everything We Know, Plus the Best Deals on Apple, Samsung and More
Amazon Prime Amazon Prime Day is four days this year. Here are the key details you need to know, plus some of our favorite deals to shop during the sale.
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.