Questions About Overdraft and Bank Fees

Overdraft and non-sufficient funds fees cost American households billions a year, and the rules governing them changed in 2025 in a direction most people missed. What follows answers the questions that come up most, using published figures from federal regulators and the current state of the rules.

What is an overdraft fee, and how is it different from an NSF fee?

An overdraft fee is charged when your bank pays a transaction that your balance cannot cover, then lends you the difference and charges for it. A non-sufficient funds fee is charged when the bank declines the transaction instead.

The distinction matters because one leaves you with the purchase and one does not. Both cost money. A declined transaction can also trigger a returned-payment fee from the merchant or biller on the other side, so a single failed payment sometimes produces two charges from two companies.

How much are these fees?

Bankrate’s 2025 checking account and ATM fee study put the average overdraft fee at $26.77 and the average non-sufficient funds fee at $16.82. The study surveyed 245 institutions across 25 large markets in June and July of 2025.

Ninety-four percent of the accounts examined still charged an overdraft fee. Sixty-one percent charged an NSF fee, which the study recorded as a new low. The overdraft figure was down about 1 percent from the prior year, so the trend is downward and slow.

How much do banks collect in total?

The Consumer Financial Protection Bureau reported that banks with over $1 billion in assets collected $5.8 billion in overdraft and NSF fees in 2023. That is the most recent figure the bureau has published.

For scale, the same analysis noted that those banks reported $11 billion to $12 billion annually in each of the five years from 2015 through 2019. Revenue fell by roughly half after many large banks changed their policies. The figure excludes credit unions and banks under $1 billion, so total industry collection is higher than $5.8 billion.

More recent estimates come from advocacy organizations rather than regulators. The National Consumer Law Center reported in June 2026 that families paid over $12 billion in overdraft and NSF fees in 2025, using a broader scope than the bureau’s measure. The two numbers are not methodologically comparable.

Who actually pays them?

A small group of account holders pays most of the fees. The Consumer Financial Protection Bureau found that consumers incurring more than ten overdraft fees a year account for nearly three quarters of all overdraft fees, and that this group paid about $380 across a year.

The bureau also reported that ninety percent of frequent overdrafters typically held no more than a few hundred dollars in their accounts at the end of any given day. The fee falls hardest on accounts with the least in them, which is the design rather than an accident of it.

Did a federal rule cap overdraft fees at $5?

A rule was finalized that would have, and Congress repealed it before it took effect. The Consumer Financial Protection Bureau issued a final rule in December 2024 covering institutions with more than $10 billion in assets, published at 89 Federal Register 106768, with an effective date of October 1, 2025.

That rule offered large institutions three options: cap the fee at $5, set a higher cap justified by actual costs, or treat overdraft as credit subject to Truth in Lending disclosures.

It never took effect. Congress passed a joint resolution of disapproval under the Congressional Review Act, enacted as Public Law 119-10 and approved May 9, 2025, which states that the rule “shall have no force or effect.” The bureau’s own compliance materials confirm the rule is inoperative and that the rest of Regulations E and Z remain in force.

So the answer people half-remember is right about the rule and wrong about the outcome. There is no $5 federal cap.

Can I opt out of overdraft coverage?

For debit card and ATM transactions, yes. Regulation E requires banks to obtain your affirmative consent before charging overdraft fees on one-time debit card purchases and ATM withdrawals. If you never opted in, those transactions should be declined at no charge rather than paid for a fee.

The protection is narrower than it sounds. Checks, automatic bill payments, and recurring debits fall outside that opt-in requirement, so a bank can pay those into overdraft and charge for it whatever you chose. Many people who believe they opted out are still exposed on their recurring payments.

How many households avoid banks entirely?

The FDIC’s National Survey of Unbanked and Underbanked Households found 4.2 percent of U.S. households unbanked in 2023, about 5.6 million households. That is the lowest rate since the survey began in 2009, when it reached 8.2 percent at its peak in 2011.

Another 14.2 percent, roughly 19 million households, were underbanked, meaning they had an account but also used services like check cashing or money orders. Among unbanked households, 66.2 percent relied entirely on cash. Unbanked rates ran higher among Black households at 10.6 percent, American Indian and Alaska Native households at 12.2 percent, and Hispanic households at 9.5 percent, against 1.9 percent for white households.

Why do people without much money skip bank accounts?

The most cited reason is not having enough money to meet minimum balance requirements. In the FDIC’s 2021 survey, 21.7 percent of unbanked households gave that as their main reason, ahead of not trusting banks at 13.2 percent and privacy concerns at 8.4 percent.

The logic is circular and rational. An account with a minimum balance and an overdraft fee penalizes exactly the volatility that low income produces, so households experiencing that volatility avoid the product. Fight For A Living Wage, a nonpartisan grassroots 501(c)(3), describes the broader squeeze as an affordability problem spanning housing, healthcare, childcare, food, transport and education. Banking fees sit downstream of it, since a household with a buffer rarely triggers them.

What reduces these fees in practice?

Several institutions have changed policies without being required to, and the terms vary by bank. Common features worth asking about include a grace amount below which no fee applies, a limit on fees charged per day, a grace period to bring the balance positive before the fee posts, and accounts that decline transactions rather than paying them.

Credit unions and some online banks price these differently than large national banks. The fee schedule is a disclosed document, and asking for it before opening an account is the only reliable way to compare.

The FDIC publishes the unbanked survey, the Consumer Financial Protection Bureau publishes the fee revenue analyses, and both are free to read.