Do you need to write an overdraft check? If you do, this check will cost you a lot of money because your bank will have to cover you. That’s because the amount you write on the check will be higher than what you currently have in your checking account. Although it is quite expensive, writing an overdraft check can definitely be useful – when you absolutely have to pay someone for example. Moreover, having the option to write an overdraft check is definitely better than to write a check that bounces – in this case, the bank will charge you a distasteful $35 NSF (non-sufficient fee) and you won’t be able to purchase anything. How to write a check even if your balance is too low? How much does it cost? Here are the answers for all your questions.
Bank overdraft opt-in
In order to write an overdraft check, you will have to sign up at a bank overdraft program (usually referred as “overdraft protection”). Overdraft protection is a service provided by your bank to advance you money when you don’t have enough of it in your account. If and when you opt-in for an overdraft protection, you will be able to use your debit card or write an overdraft check even if your balance isn’t high enough. Of course, your will have an overdrawn bank account, and there are consequences but this service can be especially useful when you have some kind of mismatch between your expenses and your paycheck. Sometimes, you just absolutely have to pay for groceries or your phone bill. The downside is that this service is not provided to you for cheap. Indeed, it is very expensive – often up to $35 per transaction you make.
For example: you have $10 on your account and you buy a salad that costs $12. You will be charged $12 (and now, with -$2 in your account) + a $35 overdraft fee (it means your balance is now -$37). That same day, you go to Starbucks and buy a coffee for $3. Well, that coffee just cost you $38 ($3 for the coffee itself + $35 for an overdraft fee because your balance is negative).
For “borrowing” from the bank $5 ($2 that were missing for the salad and $3 for the coffee), you paid $70 in fees, in one day!
You can’t spend endlessly when you overdraft. Each bank has its limit and this one will vary for different customers. As a rule of thumbs, most limits today vary between $100 and $1,000. You should check with your bank directly in order to know how much you can actually overdraft.
Our article how much can I overdraft my checking account aggregates data from dozens different banks. We display both the cost of each overdraft and the number of overdrafts a bank can charge you per day. Like mentioned above, banks can charge you multiple times per day, based on the number of transactions you make.
Overdraft interest rate
So how much banks charge for overdrafts? Most banks have a fix fee of $35 per transaction and don’t charge you interest rates. Some banks though, like Capital One 360, actually offers the option to charge you an interest rate based on the amount you’re using. For this service (you can sign up for free), you will have to ask for a line of credit linked to your checking account. This interest rate model, which is much cheaper than the $35 fix fee, is unfortunately not offered in most of the banks in the U.S.
Overdraft protection apps
What we suggest, is for you to check out the different apps we review in this website. Some apps (like apps like Earnin, apps like GoChange or apps like MoneyLion) will be able to provide you cash advances (even if you have a bad credit score), for a very low cost. It all depends on how much money you need and how fast you need it. These apps usually provide cash advance of between $25 and a few hundred dollars. If you need a loan now, online lenders could be a more suitable solution.