Banks That Don't Charge Overdraft Fees

Jacqueline DeMarcoUpdated May 26, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Of all the bank fees you can get hit with, the overdraft fee is probably the most painful. It signals that not only have you run out of money, but the bank is now going to penalize you even further (to the tune of $35). Fortunately, a new law, called the Overdraft Protection Act of 2021, makes it illegal for banks to charge “unreasonable” overdraft fees or to be deceptive or unfair about their overdraft coverage. It also forces banks to promptly notify you about your overdraft status. More good news: In the last couple of years, a growing number of banks have either dropped their overdraft fees or made it easier for customers to avoid them.Here’s what you need to know about overdrafts fees, including how they happen and how to find a bank account that doesn’t charge any overdraft fees.

What Is an Overdraft Fee?

An overdraft fee occurs when you don’t have enough money in your checking account to cover your transactions and your account goes into negative territory. The bank covers the overdrawn amount and charges you with a fee. Costs for overdraft coverage vary by bank, but they tend to run around $35 per transaction, according to the Federal Deposit Insurance Corporation (FDIC). Generally, you need to opt-in (or agree upfront) for overdraft protection. If you do, debit card transactions (at ATMs or merchants) will go through even if you don’t have sufficient funds in your account to cover them. By opting in, you generally also agree that the bank can charge you an overdraft fee. If you don’t opt-in, you can’t be charged a fee. However, your bank will typically refuse any transaction that overdraws your account.Some banks allow you to link your savings account to your checking account to avoid overdraft fees. If you overdraw your checking account, the bank will simply pull funds from your savings to cover the shortage (provided you have enough funds available). Your bank may still charge you a fee for transferring the funds automatically, but it is typically less than an overdraft charge.Recommended: Can You Overdraw a Savings Account?

Banks That Have No Overdraft Fees

Fortunately, many banks are eliminating or offering more ways to avoid overdraft fees. Early in 2022, for example, Capital One became the first large bank to eliminate all overdraft fees. Soon after, JPMorgan Chase announced changes to their overdraft fee policies — they now give account holders a full day after overdrawing their account to add funds to their account. At the same time, a growing number of smaller banks are dropping their overdraft fees in an effort to attract more consumers. What follows is a sampling of popular banks and credit unions that do not charge overdraft fees on checking accounts (based on a Google search of “banks that don’t charge overdraft fees” conducted on May 24, 2023).

Capital One

Until 2022, Capital One charged customers a $35 overdraft fee which led to an estimated $150 million in annual revenue for the bank. Today, Capital One no longer charges overdraft fees. Customers can choose to have overdrafts denied or drawn from a linked savings account.

Alliant Credit Union

This credit union got rid of overdraft fees in 2021. Members with accounts in good standing may be able to enroll in their Courtesy Pay program. With this program, the credit union will cover overdraft transactions without charging a fee. However, the overdraft balance does become due immediately.

Ally Bank

This online-only bank originally eliminated overdraft fees to support customers during the early days of the Covid-19 pandemic. It has since made this change permanent. The bank will now either cover an overdraft up to $250 without charging a fee or simply deny the transaction.

Citibank

As of June 2022, Citibank no longer charges any fees relating to overdrafts or overdraft protection. Customers can choose to link a savings account to their checking account to cover overdrafts.

Truist Bank

Customers with either the Truist One or Truist Confidence account don’t have to worry about overdraft fees. Any transactions that exceed the balance of the account are typically denied. You also have the option of linking a savings account to cover overdrafts. The bank does not charge a fee for making the transfer.

Discover

Customers who have the Discover Bank Cashback Debit Account won’t get hit with any overdraft fees. If you opt into their overdraft protection program, you simply need to link a savings account to your checking account. The bank will pull any overage from that account without charging any fees.

Axos

This online bank offers a rewards checking account that has no overdraft fees — there are no monthly fees or minimum balance requirements either (though you do need to make an initial deposit of $50). Recommended: What is an Interest Checking Account?

Wells Fargo

Wells Fargo recently eliminated some — though not all — overdraft protection fees. If you opt into their overdraft protection service, you won’t have to pay fees when a linked account covers the overage. If you don’t opt in, you can be hit with a $35 fee if you overdraw your account. However, the bank now offers a 24-hour buffer to replenish your account to avoid the fee.

The Takeaway

Many banks hit customers with overdraft fees, and these are often the most expensive fees charged by financial institutions. However, a growing number of banks and credit unions either don't charge overdraft fees or provide customers with a 24-hour window to put funds into an overdrawn account before hitting them with a hefty overdraft fee. You can also avoid overdraft fees by opting-out of overdraft coverage or, in some cases, by linking your checking account to a savings account that can cover any overages.If you’re on the hunt for a new savings account (and a competitive interest rate), Lantern by SoFi can help. With our online banking marketplace, it’s fast and easy to compare high-yield savings accounts based on annual percentage yield (APY), fees, and balance minimums. Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

Can overdraft fees be forgiven?

How do I find a bank that doesn't charge overdraft fees?

How do I bypass an overdraft fee?

Photo credit: iStock/svetikd

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About the Author

Jacqueline DeMarco

Jacqueline DeMarco is a personal finance writer and editor based in Southern California. While she spends the bulk of her time writing about complex financial issues, she also tackles a variety of subjects ranging from food to fashion to travel. Her work can be found across dozens of publications such as Credit Karma, LendingTree, Northwestern Mutual, The Everygirl, and Apartment Therapy.

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