Banks collected $12 billion in overdraft fees in 2025 after Congress reversed the $5 cap — here's how to avoid them
Banks collected $12 billion in overdraft fees in 2025 after Congress reversed the $5 cap — here's how to avoid them.
High overdraft fees can come as a nasty shock that costs Americans billions of dollars each year.
If you recall the Consumer Financial Protection Bureau issuing a ruling in December 2024 that would've seen most overdraft fees reduced to $5, you're not misremembering. The rule required banks and credit unions with more than $10 billion in assets to either reduce their fees for overdrafts to $5, charge only the amount that covers their costs or losses, or treat overdrafts like other loans, disclosing their interest rates and giving customers a choice about opening a line of overdraft credit (1).
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The CFPB projected that the rule would save $5 billion annually for Americans, amounting to $225 a year for households that pay overdraft fees.
But Congress reversed the CFPB's decision in 2025, before it took effect (2).
After the CFPB began an initiative to tackle "junk fees" in 2022 (3), leading to its decision, profits that banks made off overdraft and NSF fees dropped by $1.8 billion in 2023 compared to the year prior, a 24% decrease. And they were down a massive $6.1 billion in 2023 compared to 2019, when banks raked in $11.96 billion.
Now, after an act from Congress, banks are back to about that same pre-pandemic levels. In 2025, banks took in about $12 billion from Americans by charging overdraft and NSF fees, according to a National Consumer Law Center report (4).
Overdraft fees occur when you don't have enough money in your account to cover purchases you make. The New York Times reported that the average fee is $27, but can range up to $42 (5).
Some banks can also charge "continuous," or daily overdraft fees, charges that are assessed every day that your account stays overdrawn, the FDIC (6) says.
For ATM or debit transactions at merchants (online and in person), you have to opt in or agree up front to overdraft fees, otherwise you can't be charged. Banks often refer to this as "overdraft protection," and you can opt out of it at any time. The Times also notes that if a transaction can't be completed because you don't have enough in your account, and you have opted out of overdraft, you could still be charged an NSF fee, but they are "becoming less common."
Some banks offer an option to link a savings account to your checking account, so funds can be drawn from savings if you don't have enough in your checking to cover transactions; there may be fees for this, but the FDIC says they're typically less than overdraft charges.
If you want to switch to a bank that simply doesn't charge overdraft fees, Capital One, Citibank, American Express bank and Ally Bank have dropped them, according to the Times.
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If you need to overdraft your checking account for an emergency purchase, you could alternatively look for a bank that offers small installment loans (generally less than $1,000), the Times reported.
"Customers can borrow the money when needed and have a longer time — three to four months — to pay them back. Interest rates are typically lower than with overdraft fees."
Fintech firms may also have alternatives that work for you. Chime, for example, offers a service called SpotMe that will cover up to $200 in overdrafts, as long as customers have a direct deposit set up from their employer or government benefits program.
