The Average American Pays This Much in Overdraft Fees. How Do You Compare?

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  • The average consumer pays over $250 on overdraft fees.
  • Learn more about these fees and find out how to avoid them.

Overdraft fees can be costly and could put you in a challenging financial situation.

If you have a checking account, you should be aware of the extra fees your bank charges. Monthly maintenance fees, foreign transaction fees, and overdraft fees are some additional costs you may incur. Many people fall victim to overdraft fees.

An overdraft occurs when you don't have enough money in your bank account to cover a transaction. When this happens, most banks charge an overdraft fee. Find out what the average American pays in overdraft fees and learn how to avoid these fees.

Banks made nearly $15.5 billion off overdraft fees in 2019

Banks make money off the extra fees they charge, and overdraft fees bring in a significant amount of money. According to the Consumer Financial Protection Bureau, banks made nearly $15.5 billion in revenue from overdraft fees in 2019.

These fees can be costly, and while they vary, banks typically charge $30 or more. Unless your bank has a daily fee limit, you could be charged this fee multiple times in a day if your account continues to be overdrawn through numerous transactions.

The average person pays over $250 yearly on overdraft fees

Are you wondering how much a typical American pays in overdraft fees? It's a lot.

Based on research conducted by the Consumer Financial Protection Bureau, the average U.S. consumer pays over $250 annually on overdraft fees.

It turns out that compared to other fees, overdraft fees make up most of the checking account fees that consumers are charged.

The agency also found that transactions that led to overdrafts are typically small.

For debit card transactions, the median amount that led to an overdraft fee was $24. For all types of transactions, the median transaction amount that led to an overdraft fee was $50.

How to avoid overdraft fees

Are you sick of paying expensive overdraft fees? You can take steps to avoid these extra fees.

Here are three tips:

1. Choose a bank that doesn't charge overdraft fees

One option is to bank with a company that doesn't charge overdraft fees. Ally Bank and Capital One are two banks that have eliminated overdraft fees. Their initiatives will save many Americans a lot of money.

You could easily avoid overdraft charges if you're willing to switch banks. Our list of the best checking accounts can help guide you in choosing a new checking account.

2. Keep extra money in your checking account

Another option is to pad your bank account with extra money. If you can afford to do so, keeping some extra cash in your checking account can be beneficial. That way, you're less likely to overdraft your account if an unexpected charge comes through.

3. Monitor your spending

Finally, the best way to avoid overdraft fees is to keep a close eye on your spending. If you monitor your bank account balance regularly and know what expenses are coming up, you can ensure that you have enough funds to cover your purchases.

Budgeting apps are an excellent resource if you're new to monitoring your account balance and spending. You can see where your money is going, set spending limits and goals, and plan for larger purchases. Digital tools can make it easier to stay on top of your finances.

Are you looking for additional tips on how to manage your money? Check out our personal finance resources.

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