Overdraft Fee: What Does It Mean?

An overdraft fee is a charge your bank imposes when you spend more money than you have in your checking account and the bank covers the difference. Fees typically range from $25 to $35 per transaction and can stack up quickly if multiple purchases are made while your account is negative. Some banks offer overdraft protection by linking your checking account to a savings account or line of credit, which can reduce or eliminate the fee. Others have eliminated overdraft fees entirely or replaced them with small-dollar, low-cost coverage options. Knowing your bank's overdraft policy and keeping a small buffer in your checking account are two simple ways to avoid these charges.