What Is Overdraft?
Example: "I had $50 in my account and bought $75 worth of groceries. The bank covered the $25 overdraft but charged me a $34 fee."
Why It Matters
Overdrafts are one of the most expensive bank fees relative to the amount involved. Paying a $34 fee on a $25 overdraft is effectively a 136% charge. Some banks process transactions from largest to smallest, which can trigger multiple overdraft fees in a single day. You can opt out of overdraft protection, which means your card will simply be declined rather than approved when you don't have enough funds. This avoids fees entirely. If you do want overdraft coverage, linking a savings account as backup is usually cheaper than paying per-overdraft fees.
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