You might think that if you swipe your debit card and don’t have enough money in your checking account to pay for the purchase, the transaction will be declined. But that’s not really the case.
There is an overdraft coverage check box that some people check when they open their checking account. If you check that box, the transaction will go through even if you don’t have enough balance, but you may end up with a payment.
What the ATM/debit overdraft inbox does
An overdraft gives you the ability to withdraw money from your bank account even if the requested amount exceeds your current balance. You get money from your ATM or make purchases, but you’ll end up with a negative balance, and banks often charge overdraft fees. Fees vary but can be $30 or more. Banks can cover your transaction and charge you a fee if it is insufficient in your accounts or declines the transaction. You have to sign in and agree to receive overdraft fees when they become active in order for the bank to be allowed to charge you that amount.
This opt-in rule is for ATM withdrawals and one-time debit card transactions. Check and automated clearinghouse (ACH) payments may be handled differently. Here’s an example: If you opt out and only have $10 in your checking account, a $20 ATM withdrawal will likely not be approved, but you also won’t get an overdraft fee.
Why is this so important after rolling back the overdraft fee cap?
Overdraft fees can add up quickly, especially if you overdraw your balance multiple times in the same day. That’s part of the reason why the Consumer Financial Protection Bureau (CFPB) is trying to limit overdraft fees by 2024. But the proposal was rejected by Congress in 2025.
That means it’s up to you to participate. You can opt out of overdraft services by contacting your bank. Some transactions will not go through if it will lead to a negative balance, but you get to avoid expensive fees.
How to check your status and exit if you want
Consumers will pay more than $12 billion in overdraft and underdraft fees (NSF) by 2025, according to a report by the National Consumer Law Center (NCLC). That’s why it’s a good idea to check with your financial institution even if you believe you haven’t opted for these services. If it is difficult to access that information, you can contact your bank’s customer support to confirm the status of your account.
Ask your nominee if you have currently opted in to ATM overdraft coverage and one-time debit card transactions, and ask for written confirmation of your current status.
When you withdraw, you still have some options to keep your balance in good standing. Low balance alerts let you know when it’s time to top up your checking account, and you can link your savings account for transfers if needed. Doing business with a bank without overdraft fees and keeping a small cash reserve where possible can also put you in a better position.
