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Overdraft Guidance

Overdrafts and bounced checks

When you:

  • write a check
  • withdraw money from an ATM
  • use your debit card to make a purchase, or
  • make an automatic bill payment or other electronic payment

for more than the amount in your checking account, you overdraw your account.  Your bank has the choice to either pay the amount or not.  If it pays even though you don’t have the money in your account, you may be charged an "overdraft" fee.  If your bank returns your check without paying it, you may be charged a "bounced-check" or "nonsufficient funds" fee.  And the person or company that you wrote the check to - for example, a store, your landlord, or the phone company - may charge you a "returned-check" fee in addition to the fee your bank charges you.

Avoiding overdraft and bounced-check fees

The best way to avoid overdraft and bounced-check fees is to manage your account so you don’t overdraw it.

  • Keep track of how much money you have in your checking account by keeping your account register up-to-date.  Record all checks when you write them and other transactions when you make them. And don’t forget to subtract any fees.
  • Pay special attention to your electronic transactions.  Record your ATM withdrawals and fees, debit card purchases, and online payments.
  • Don’t forget about automatic bill payments you may have set up for utilities, insurance, or loan payments.
  • Keep an eye on your account balance.  Remember that some checks and automatic payments may not have cleared yet.
  • Review your account statements each month.  Between statements, you can find out which payments have cleared and check your balance by calling your bank or by checking online or at an ATM.  Be sure to find out the actual amount in your account - your account balance not including any funds available to you through "courtesy overdraft-protection," or "bounce coverage" plans.
  • Link your checking account to a savings account you have with the bank.  If you overdraw your checking account, the bank can transfer funds from your savings account to your checking account. Ask your bank about transfer fees.

Sometimes mistakes happen.  If you do overdraw your account, deposit money into the account as soon as possible to cover the overdraft amount plus any fees and daily charges.  Depositing money into your account can help you avoid additional overdrafts and fees.

To learn more about smart ways to manage your money, complete the FDIC Money Smart financial education program online through www.fdic.gov/consumers/education, or learn about the five building blocks for managing and growing your money at www.mymoney.gov. You can also find financial education workshops or individualized counseling in your area.