Best Checking Accounts for Minimizing Overdraft Fees

Is overdrafting your checking account a bad habit you can’t break? You can limit the damage by choosing an account that keeps the cost of overdrafts relatively low.

Overdraft fees can turn even a small purchase into a big expense.

That’s because banks often charge an overdraft fee for each transaction that occurs while your account is overdrawn.

Losing track of your balance just once can result in multiple charges to your account.

Fortunately, there are checking accounts that can help you minimize overdraft charges. We highlight ten accounts below, along with some additional steps you can take to reduce those fees.

What is the Average Overdraft Fee Now?

According to the latest MoneyRates update on bank fees, the average overdraft fee dipped by 19 cents to $32.11.

Overdraft fees have declined over the past two and a half years since reaching a peak of $32.84. However, they remain very costly, at more than twice the amount of the average monthly maintenance fee.

The cost of overdrafts is especially high because you can be charged multiple fees in a single day if you have several transactions while your account is overdrawn.

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Overdraft Fees by Bank

Here are ten banks that can help you minimize overdraft charges. These aren’t necessarily the banks with the lowest overdraft fees, but many have overdraft fee caps that could help save money for people who are prone to frequent overdrafts.

Note that, where some of the accounts have identical overdraft policies, the rankings were determined based on secondary criteria such as other fees and account minimums.

Discover® Bank Cashback Checking

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: N/A
(Since there is no overdraft fee, there is no need to cap the number of fees that can be charged.)

ACCOUNT FEATURES

A few accounts currently have no overdraft charges, but the Discover Bank Cashback Checking account adds additional value by having no monthly maintenance fee and no minimum balance requirement.

This account even offers cash back on a certain number of transactions.

BANK DETAILS

Perhaps best known for its popular cashback credit card, Discover also has a significant banking presence with over $80 billion in deposits. They are an online bank, so they’re suitable for consumers who want the convenience and savings associated with online banking.

Axos Bank Essential Checking

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: N/A

ACCOUNT FEATURES

Like the Discover account, the Axos Essential Checking account has one of the best overdraft protection plans because it charges no overdraft fee and also has no monthly maintenance fee and no minimum balance requirement.

The only difference between it and the Discover account is a $5 monthly fee for paper statements, which wouldn’t be an issue if you plan to bank exclusively online.

BANK DETAILS

Axos is primarily an online bank with over $11 billion in customer deposits. It also offers savings and money market accounts, which can be linked to its checking account for additional overdraft protection.

Eastern Bank Premier Checking

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: N/A

ACCOUNT FEATURES

The Eastern Bank Premier Checking account doesn’t charge overdraft fees but does have a $10 monthly maintenance fee unless you maintain a combined balance of $25,000 in related accounts.

BANK DETAILS

Eastern Bank is based in Boston, MA, and has 90 locations. Customer deposits total over $11 billion.

HSBC Premier Checking

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: N/A

ACCOUNT FEATURES

The HSBC Premier Checking account does not charge an overdraft fee but does have a $50 monthly service fee. This fee is waived if you maintain at least $75,000 in combined balances among HSBC accounts.

BANK DETAILS

HSBC has 159 domestic locations across nine states and currently houses over $160 billion in customer deposits.

Ally Bank Interest Checking

OVERDRAFT FEE: $25

OVERDRAFT FEE CAP: 1

ACCOUNT FEATURES

Ally’s overdraft fee of $25 is well below the industry average of $32.11, and with a cap of one overdraft fee per day, Ally could significantly limit the damage from overdrawing your account. Ally Bank’s checking account also has no minimum and no monthly service fee.

BANK DETAILS

Ally is an exclusively online bank with over $133 billion in customer deposits.

SoFi® Checking and Savings

OVERDRAFT FEE: $0 if you have direct deposit

ACCOUNT FEATURES

SoFi‘s overdraft coverage on its checking and savings account means that if you have direct deposit, you’ll be covered for up to $50 in overdrafts. You must direct deposit at least $1,000 a month, and if you go beyond $50 in overdrafts, you will be charged a fee.

This account links checking and savings with no monthly service fee.

BANK DETAILS

SoFi offers an online checking and savings account in tandem. You can’t get a savings or checking account separately at SoFi.

State Farm Bank Checking

OVERDRAFT FEE: $25

OVERDRAFT FEE CAP: 3

ACCOUNT FEATURES

The $25 overdraft fee is well below the industry average. By capping the number of overdraft fees it can charge in a single day, this account could limit the cost of overdrafts.

The State Farm Bank Checking account has no minimum or monthly service fee. However, you’ll have to pay $5 per month for paper statements.

BANK DETAILS

State Farm Bank offers online banking, including savings and money market accounts, that can be linked to your checking account for additional overdraft protection. Transfers to cover overdrafts incur a $3 charge.

State Farm Bank currently has over $11 billion in deposits.

Potential customers should note that State Farm has announced that if regulators approve the deal, its deposit accounts will be acquired by U.S. Bank. This could impact the terms offered for those accounts.

Chase Total Checking

OVERDRAFT FEE: $34

OVERDRAFT FEE CAP: 3

ACCOUNT FEATURES

While Chase Total Checking’s overdraft fee is more expensive than average, people who frequently overdraft their accounts may find this mitigated somewhat by the cap of three times a day that you can be charged an overdraft fee.

This account also charges a $12 monthly maintenance fee, but it can be waived under some circumstances.

BANK DETAILS

Chase is one of the largest financial institutions in the U.S., with over 4,700 branches across 48 states and over $2.6 trillion in domestic deposits.

Wells Fargo Bank Everyday Checking

OVERDRAFT FEE: $35

OVERDRAFT FEE CAP: 3

ACCOUNT FEATURES

While the $35 overdraft fee is well above average, having this capped at three charges per day could be an attractive feature for those who overdraft frequently.

There is also a $10 monthly fee, but this can be waived if certain conditions are met.

BANK DETAILS

Wells Fargo is one of the most prominent financial institutions in the country, thanks in part to having over 5,300 locations across 40 states. Wells Fargo has more than $2.3 trillion in domestic deposits.

Current Checking

OVERDRAFT FEE: $0

ACCOUNT FEATURES

Current checking doesn’t charge an overdraft fee, but there are limits. You may be covered for up to $25 in overdrafts starting out, but as you continue to use your account and maintain good credit, you could be covered for up to $200 in overdrafts.

BANK DETAILS

Current checking is for customers comfortable with banking online, as there are no branches, and customer service is mostly online.

Steps to Take to Minimize Overdraft Charges

Reducing overdraft fees is a matter of both which account you choose and how you use it. Here are some tips that can help:

Look at both overdraft fees and daily fee caps

Take a cue from this study’s methodology. It’s important to look at both the size of the overdraft fee and the maximum number of those fees you could be charged in one day. Banks with no overdraft fees are very rare, but they are a great place to start your search.

Choose an account that matches up well with how you’ll use it

Some accounts waive various charges if you maintain a certain account balance. Others allow free balance transfers from savings accounts at the same bank to cover overdrafts. Also, how often you overdraft your account could affect which account is best for you.

Know the timing of automatic transactions

If you have direct deposit and/or automatic bill-pay set up, your account balance may change without you being aware of it. This could cause you to inadvertently overdraft your account. If available, sign up for text notifications of any transactions in your account. At the very least, be aware of the timing of those automatic transactions so you can anticipate when your balance will change.

Use online tools for the most up-to-date information

Being able to view your account online is a big improvement over-relying on monthly statements to check your account balance. If you can, check your balance regularly to avoid accidental overdrafts.

Understand how to balance your checking account

Balancing your checking account means comparing your records against the bank’s records to see if there are any differences. This is a vital skill because you may have initiated transactions of which the bank is not yet aware and vice versa. Balance your checking account at least monthly to maintain an accurate picture of your balance.

Between overdraft fees, monthly service charges, and ATM fees, having a checking account can become very costly. Take the time to choose a checking account with reasonable terms that fit the way you’ll use the account. This can save you hundreds of dollars a year.

Methodology: How We Find Checking Accounts that Minimize Overdraft Fees

Overdraft fees can be most damaging when they come in bunches. Banks charge multiple overdraft fees when a customer has more than one transaction on a day when the account is overdrawn.

So MoneyRates surveyed 89 banks and 345 different checking accounts to find the ones that offer:

• Low overdraft fees
• Caps on the number of fees charged per occurrence

Beyond that, this study also considered monthly fees and account minimums. After all, the higher a bank’s fees, the more likely the account balance is to become overdrawn. Also, minimum balance requirements mean that customers have to be concerned not just with overdrafting the account but also with maintaining a large enough balance to keep the account open.

Frequently Asked Questions