Financial Readiness
What these fees are, the one setting that stops most of them, and how to keep your balance out of the red.
An Army Community Service financial readiness specialist educates a customer about saving and account habits. U.S. Army photo by Mary Davis, USAG Rheinland-Pfalz, DVIDS (public domain).
An overdraft fee is when the bank covers a payment your balance cannot, then charges you, often around $35 per item. An NSF fee is when the bank instead returns the payment and still charges you. Both come from the same thing: spending against money that is not there.
The one move that matters: leave overdraft coverage off for ATM and one-time debit card purchases. The default is off, so do not opt in, which means giving the bank permission to charge you. With it off, a purchase that would overdraw you just gets declined, with no fee.
Keep overdraft coverage off for ATM and one-time debit purchases, then stack a few simple guardrails so a surprise never costs you a fee.
Leave it OFF: Leave overdraft coverage OFF for ATM and one-time debit purchases. A purchase that would overdraw just gets declined, with no fee. The default is OFF, so opt out if you turned it on.
Stack the guardrails
Without opt-in, the purchase declines instead of costing you a fee.
Source: CFPB · NCUA
An overdraft means the bank pays a transaction you did not have the money for, then charges you. An NSF fee means the bank refuses the transaction and still charges you for the trouble. Both come from the same problem: spending against money that is not there. Overdraft fees often run around $35 each, and they stack, so one bad day can cost a lot. Many banks have dropped or reduced NSF fees lately, but policies vary, so read your account terms.
Do not opt in to overdraft coverage for ATM and one-time debit card purchases, or opt out if you already did. To opt in means you give the bank permission to charge you. Under the Electronic Fund Transfer Act and Regulation E, the bank cannot charge an overdraft fee on those purchases unless you opted in. The default is off. Without opt-in, a debit purchase that would overdraw your account is simply declined at the register, with no fee. For most junior service members, that is the safer setting.
There is no legal cap on these fees. A CFPB rule finalized in December 2024 would have capped certain overdraft fees at large banks, but Congress overturned it under the Congressional Review Act, signed into law in May 2025, so the cap is not in effect. So do not count on a limit. Each bank or credit union sets its own overdraft and NSF amounts. Your protection is the opt-in rule above and your own habits. One catch on that rule: it only covers ATM and one-time debit. Checks, ACH payments, and recurring debits can still overdraw you and trigger a fee.
There is no legal limit on these fees, so the fix is not a law, it is the opt-in setting and a few habits. The numbers show this is a cycle you can break.
$35
a typical overdraft fee per item, and they stack.
A repeat cycle: 9% of accounts pay about 79% of these fees. That is a repeat cycle, not bad luck.
Break it: Turn off opt-in, set alerts, and the money stays yours. This is a problem you can fix.
Know this
This is a problem you can fix with one setting and a few habits.
Source: Congressional Research Service · CFPB
You do not have to sort this out alone. Start with your bank or credit union to check and change your overdraft opt-in setting and to ask about a fee reversal. Military OneSource offers free financial counseling by phone at 800-342-9647. Your installation Personal Financial Manager, or PFM, which is the on-base counselor for money questions, can help you set up alerts and a spending plan. Military OneSource is linked in Sources below.
If I opt out, what happens at the register?
A one-time debit or ATM purchase that would overdraw your account is declined, and you are not charged an overdraft fee for it. You can still pay with money you have.
Can a check or autopay still overdraw me?
Yes. The opt-in rule only covers ATM and one-time debit. Checks, ACH, and recurring debits can still overdraw your account and trigger a fee.
Is overdraft coverage ever worth keeping on?
That is a personal call. Some people keep it for one critical recurring bill. Just know the fee is not capped by law, so weigh the cost against the convenience.
