Best Banks for Avoiding Overdrafts in 2024 (2024)

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If you make a purchase or pay a bill with money that's not in your checking account, you'll overdraft. Many financial institutions charge fees when you overdraft your account, so you could end up owing even more money that you don't have the funds to pay.

If you prioritize finding a bank account that has minimal overdraft fees, you have plenty of options. Here are our top picks on the best banks for overdraft fees. Our top picks have eliminated overdraft fees, or they have free overdraft protection that lets you transfer funds from a linked savings account.

Best Banks for Avoiding Overdraft Fees

• Ally Spending Account
• Axos Bank Rewards Checking
• Capital One 360 Checking
• Discover® Cashback Debit Account
• Alliant High-Rate Digital Checking
• Connexus Xtraordinary Checking Account
• Citi Access Checking
• Truist One Checking

All of our top picks, except Connexus Credit Union, have eliminated overdraft fees. All of the financial institutions on our list are protected by FDIC or NCUA insurance. Your money is safe at a federally insured financial institution. When a financial institution is federally insured, up to $250,000 per depositor is secure in a bank account.

In January 2024, the Consumer Financial Protection Bureau proposed a rule to limit overdraft fees and protect consumers. The proposal mentions setting a benchmark fee, which could be as low as $3, $6, $7, or $14. If adopted, the rule could take effect in October 2025.

Compare the Top Banks for Avoiding Overdraft Fees

The best banks for avoiding overdrafts give you multiple ways to overdraft your account without incurring fees. These include allowing you to go into the negatives without fees and letting you set up overdraft protection using another bank account or a credit card. Keep in mind that the latter form of overdraft protection can get in the way of your budgeting plans, so consider using a budgeting app in conjunction with this form of overdraft protection if you go for it.

Here are the best banks for avoiding overdrafts as picked by Business Insider editors in 2024.

Ally Spending Account

Ally is a strong choice if you are comfortable with an online-only banking experience. In 2021, the online bank eliminated overdraft fees on all accounts. Ally also has two free overdraft protection options: an overdraft transfer service and CoverDraft. You can use one service or both.

With the overdraft protection transfer service, you'll link your checking account to your savings account. If you overdraw from your account, Ally will transfer increments of $100 from your savings account to cover the transaction.

Meanwhile, CoverDraft is a service that provides up to $250 in temporary overdraft coverage when you have debit card purchases, automatic payments, checks, or ACH transfersfrom other banks that result in a negative balance on your account.

To be eligible for CoverDraft, you'll need to deposit at least $100 in your account and maintain your balance for 30 days. Once you're eligible, you'll qualify for $100 in temporary overdraft coverage. If you'd like to receive up to $250 in temporary overdraft coverage, you'll have to receive a qualifying direct deposit of at least $250 for two months in a row.

The Ally Spending Account also might also be a good option if you'd like to have tools to help manage your money. For example, Ally lets you create spending buckets to help you set money aside for particular expenses. You'll be able to label your buckets with names like "groceries" or "rent."

Ally may close your checking account if you maintain a negative balance for more than 45 days.

Ally Spending Account Review

Axos Bank Rewards Checking

Axos is a great choice if you're searching for a high-yield checking account that doesn't charge overdraft fees or non-sufficient funds fees. Axos also offers free overdraft protection that links your checking account to a savings account.

You'll earn interest on Axos Bank Rewards Checking balances up to $50,000 if you do the following:

• Earn0.40% APY (Annual Percentage Yield)when you receive at least $1,500 in direct deposits in a month. You have to meet this requirement to be able to earn any additional interest.
• Earn0.30% APYwhen you make 10 debit card transactions in a month (minimum $3 per transaction) or you need to sign up for Account Aggregation/Personal Finance Manager.
• Earn 0.99% APY if you keep at least a daily average of $2,500 in an Axos Managed Portfolios Invest Account monthly.
• Earn 0.99% APY if you keep at least a daily average of $2,500 in an Axos Self-Directed Trading Invest Account monthly.
• Earn0.60% APYif you make a monthly Axos consumer loan payment with your Reward Checking account

If you accomplish all goals in a month, you earn the maximum available APY.

Account balances over $50,000 won't earn interest. If you would like to maintain a high account balance, you may prefer another high-yield checking account.

Axos Bank Review

Capital One 360 Checking

Capital One 360 stands out because it has one of the strongest free checking accounts out there. Capital One 360 Checking has no monthly service fees and no overdraft fees. At Capital One 360, you also have two solid overdraft services: free savings transfers and no-fee overdrafts.

With free savings transfers, you'll link your checking account to a savings account. If you overdraw from your checking account, Capital One will make one transfer to cover your overdraft.

No-fee overdraft is a service where Capital One approves check payments, bill payments, or recurring debit payments even if it results in a negative balance for your account. To qualify, you'll need to receive at least $250 in direct deposits during two of the three previous months.

If you do not select one of the overdraft services mentioned, Capital One 360 automatically declines transactions that would make your account have a negative balance.

Capital One Review

Discover Cashback Debit Account

You might like Discover if you'd like to get rewards checking account that doesn't charge overdraft fees or non-sufficient funds fees. The Discover® Cashback Debit Account lets you earn 1% cash back on up to $3,000 of purchases per month (see website for details).

The online bank also offers a free overdraft protection program that links your checking account to a savings account. Discover's Overdraft Protection program covers online bill payments, ACH transfers initiated at another bank, and checks.

If you don't sign up for overdraft protection, any transactions that would create a negative balance in your account will be denied.

Discover Bank Review

Alliant High-Interest Checking Account

If you prefer an online credit union over a bank, Alliant is an excellent option. Alliant ranks as one of our best credit unions.

The online credit union eliminated overdraft fees on checking accounts in 2021. Alliant also has free overdraft protection program that lets you link your checking account to a savings account to cover overdrafts.

You'll also notably earn 0.25% APY on the Alliant High-Rate Digital Checking, regardless of your balance.

Opening an account with a credit union usually entails specific membership requirements. Alliant is a credit union anyone can join as long as you're in the US and you donate $5 to Foster Care to Success.

Alliant Credit Union Review

Connexus Xtraordinary Checking Account

Connexus Credit Union is also featured in our best credit unions guide. Connexus Credit Union has a $4 overdraft fee, which is less than what most financial institutions generally charge for overdrafts. The online credit union also has a free overdraft protection program that lets you transfer money from your savings account to restore a negative checking account balance.

You might like the Connexus Xtraordinary Checking Account if you use your debit card frequently and/or spend at least $400 per month with your debit card. That way, you can earn a solid interest rate.

Credit unions require membership to open bank accounts. To become a member of Connexus, make a one-time $5 donation to the Connexus Association; be an employee, retiree, member, student, student graduate, or relative of a member of certain organizations; live in Minnesota, Ohio, or Wisconsin; or be a relative, spouse, or housemate of a Connexus member.

Connexus Credit Union Review

Citi Access Checking

Citi is a solid choice if you want to open a checking account at a national bank. Citi is a national bank with branches in California, Connecticut, Florida, Illinois, Maryland, Nevada, New Jersey, New York, South Dakota, Virginia, Washington, DC, and Puerto Rico. You can also open online accounts if you do not live in a state that has a branch.

In 2022, Citi eliminated overdraft fees, returned item fees, and overdraft protection fees on bank accounts. It's also fairly easy to waive the monthly fees for its lowest-tier checking accounts like the Citi Access Checking (a checkless bank account) ($5 monthly service fee).

You'll have to pay attention to monthly service fees and how to waive them because it varies depending on which accounts you get.

Citi Review

Truist One Checking Account

Truist Bank could be another suitable option if you favor brick-and-mortar banks instead of online-only financial institutions. Truist Banks is primarily on the East Coast, with branches in Alabama, Arkansas, Georgia, Florida, Indiana, Kentucky, New Jersey, Maryland, Mississippi, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Washington, DC.

In 2022, Truist launched two new checking accounts to help with avoiding overdraft fees. It also eliminated fees for returned items and overdraft protection transfers.

The Truist Confidence Account is a checkless checking account that doesn't charge overdraft fees. You can utilize overdraft protection to cover overdrafts if you have a Truist Confidence Savings Account; otherwise, any transaction that exceeds your account balance may be denied or returned.

The Truist One Checking also doesn't charge overdraft fees and has more overdraft options (although, it also has a higher monthly maintenance fee). You can link the Truist One Checking to another Truist bank account or potentially use a service called $100 Negative Balance Buffer.

With a $100 Negative Balance Buffer, you can overdraw up to $100 from your account. To qualify for the service, you'll need to have an account open for at least 35 days, maintain a positive account balance,and receive at least one direct deposit of $100 for two months in a row. Also, bear in mind that you'll need to continue to receive monthly direct deposits of $100 or more to remain qualified for the service.

With Truist checking accounts, you'll want to be mindful of monthly service fees if you don't meet certain requirements each month. Truist Confidence Account has a $5 monthly service fee, and the Truist One Checking has a $12 monthly services fee.

Truist Bank Review

Bank Trustworthiness and BBB Ratings

The Better Business Bureau assigns companies grades, ranging from F to A+. Strong BBB scores indicate that companies respond effectively to customer complaints, advertise honestly, and are transparent about business practices. A strong BBB grade doesn't guarantee you'll have a smooth relationship with a company, though.

Here are the BBB grades for our top picks:

Ally has an A rating because it has some unresolved customer complaints on the BBB website.

Citi has an F rating because it has a high volume of customer complaints on the BBB website, and it has failed to respond to many customer complaints.

Alliant Credit Union, Capital One, Discover, and Citi have been involved in recent public controversies.

In 2024, Alliant settled a class-action lawsuit, agreeing to pay $86,750 to the lawsuit's members. The lawsuit says that Alliant denied services to DACA recipients and other immigrants because of their citizenship status rather than their creditworthiness. By settling, Alliant does not admit wrongdoing.

Capital One used to have an account called 360 Savings. In 2019, Capital One launched the new 360 Performance Savings Account, which paid a higher interest rate. Many customers thought their old savings accounts would transition into this new one, but they actually had to open a new 360 Performance Savings Account to earn the higher rate. In the lawsuit, the plaintiffs' lawyers allege that Capital One didn't inform 360 Savings customers that these were two distinct accounts, or that 360 Performance Savings paid a higher rate. However,Capital One wants this case dismissedbecause it claims people had every opportunity to learn these facts on their own. This case is still ongoing.

In 2024, Discover settled a class action lawsuit for almost $1 million. The lawsuit claimed that Discover denied Deferred Action for Childhood Arrivals, or DACA, recipients loans because of their immigration status. In the settlement, Discover agreed to rewrite its lending rules to make DACA recipients equally eligible for loans as comparable U.S. citizens.

In 2023, Citi was required to pay $25.9 million dollars by the Consumer Financial Protection Bureau. The Bureau says that Citi intentionally discriminated against Armenian American credit card applicants from 2015 to 2021. Of that $25.9 million, $1.4 million of that payment will go to affected applicants.

In addition, Citi is currently being sued for sexual harassment by a managing director at the company, Ardith Lindsey. Citi hasn't admitted to any wrongdoing, and this case is ongoing.

What to Look for in Overdraft Policies

Low Fees and Clear Terms

First and foremost, you should try to find banks that don't charge overdraft fees at all, or banks with low overdraft fees. We've listed several banks above that don't charge overdraft fees, but still allow you to overdraft your account up to a certain amount.

If a bank does have overdraft fees, make sure you understand when you'll be charged those fees, and how much you'll be charged for them. Look out for fine print that might indicate you'll have to pay a higher fee than you're prepared for.

Overdraft Protection Services

Many banks allow you to set up overdraft protection services by linking another account, credit card, or line of credit to your checking account. If you end up overdrafting your account, the bank will either transfer money from the savings account or put the charge on the credit card or line of credit instead.

There might be a transfer fee associated with this service, but it will almost definitely be less expensive than the overdraft fee you would have otherwise been charged.

If you choose to set up overdraft protection services, you'll still want to keep an eye on your spending to make sure you're not cutting into your savings or putting money on a credit card that you can't pay off. Consider using personal finance software to help stick to your budget.

Options for Fee Waivers and Alerts

Some banks let you refund your overdraft fees under certain circ*mstances, such as if you restore a positive account balance within a day or if you haven't overdrawn your checking account before. In addition, many banks let you set up low balance alerts to let you know when you're about to run out of money in your account.

Check with the bank you're interested in to see if they offer any of these services.

Overdraft Protection Services

Linking Accounts for Automatic Transfers

One of the most common ways to set up overdraft protection services is to link a savings account to your checking account. If you overdraft your account, the money will come out of your savings account instead.

You might prefer this over other kinds of overdraft protection, because you won't end up accidentally accruing a debt you can't repay. However, you'll want to watch out for transfer fees. Also, keep in mind that you could end up accidentally cutting into your savings with this method.

Overdraft Lines of Credit

Setting up an overdraft line of credit will let you borrow money from a line of credit to pay off any excess charges you make. This can be helpful in avoiding overdraft fees, but keep in mind that setting this up could result in you having high-interest-rate debt that you don't have the money to pay off.

Overdraft Forgiveness Programs

Several banks, such as Wells Fargo, will refund any overdraft fees under specific circ*mstances. Some banks refund overdraft fees if the excess charge is under a certain threshold, some banks refund fees if you put money back into your account before a certain amount of time passes, and some banks refund the first few overdraft fees you accrue.

While even the best overdraft forgiveness programs aren't as good as not charging overdraft fees at all, it can still be helpful if you do end up accidentally overdrafting your account. Check with your bank to see how to get overdraft fees refunded.

How to Avoid Overdraft Fees

Monitoring Account Balances

Overdraft protection and management are both important parts of avoiding overdraft fees. The best way to avoid overdraft charges is to keep an eye on your account balance and avoid making purchases if you don't have enough money in your account. This includes making sure you have enough money to make automatic payments, such as rent, insurance, or utilities payments.

Setting Up Account Alerts

Many banks offer financial tools to prevent overdrafts, such as account alerts. Account alerts will let you know if your account balance goes under a certain amount of money. Check with your bank to see if it offers this feature.

Opting Into the Right Overdraft Protection Services

If you opt into overdraft protection services like the ones listed above, you can avoid paying overdraft fees. Just make sure you're not signing up for services that will end up costing you more money in the long run, such as with overdraft protection through lines of credit.

FAQs

Why You Should Trust Us: Our Expert Panel for the Best Banks for Avoiding Overdraft Fees

We consulted banking and financial planning experts to inform these picks and provide their advice on how to find the right bank for you.

Here's what they had to say about choosing a bank. (Some text may be lightly edited for clarity.)

How can someone determine whether a banking institution is the right fit for them?

Mykail James, MBA, certified financial education instructor,BoujieBudgets.com:

"The No. 1 thing about a checking account is you should know what provider the debit card is coming from. And a lot of people don't think about that, because there are places that don't accept MasterCard or don't accept an Amex."

Sophia Acevedo, banking editor, Business Insider:

"Think about which bank accounts you'd like to open and which features you're looking for. Let's say you sometimes overdraw from your bank account. When you're deciding on a bank, you'll want to see if the bank offers a checking account that doesn't charge overdraft fees. You could also see if the bank has an overdraft protection program where you can manageably waive fees by meeting certain requirements."

How can someone decide between a bank and a credit union?

Tania Brown, CFP® professional and vice president of coaching strategy at OfColor:

"For most people, it falls into five categories: location, interest rates, services, technology, and relationships. Next, prioritize what's important and you will have your answer. For instance:

• If multiple regional and national locations are important: Banks typically have more locations than credit unions.
• If the most important thing to you is a high interest rate: Credit unions, on average, offer better interest rates than banks.
• If a lot of services (commercial banking, business banking, investment services, etc.) are valuable to you: Larger banks offer more services than most credit unions.
• If feeling like a person, not a number, matters to you:Credit unions are known for great personalized customer service.
• If you are a tech junkie: Larger banks typically offer more tech bells and whistles for online users than credit unions."

What makes a checking account good or not good?

Roger Ma, CFP® professional with lifelaidout®and author of"Work Your Money, Not Your Life":

"I would look at the ATM branch locations and then minimum balance amounts to not incur a monthly fee… I think there's other stuff that could make life easier, whether it's free checks, online bill pay, are they in the Zelle network?"

Sophia Acevedo, banking editor, Business Insider:

"I would for a checking account that either doesn't have any monthly service fees or offers multiple ways to waive the fee. I would also look at customer support availability and mobile app ratings."

Methodology: How Did We Choose the Best Banks for Avoiding Overdraft Fees?

Business Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product or account, we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

For our guide, we researched over two dozen financial institutions and financial service providers to find options that minimized overdraft fees.

Since numerous checking accounts at online banks didn't charge overdraft fees, we narrowed down our picks for this category by looking at minimum opening requirements and overdraft protection programs. For all of our top picks, we also considered the overall banking experience at each bank by using our rating methodology for checking accounts, which assesses criteria like customer support availability, mobile app ratings, and ethics.

See our full ratings methodology for checking, business checking, savings, and money market accounts »