Overdraft
An overdraft happens when you spend more than your checking balance and the bank covers the difference. It usually triggers a fee — often around $35 per transaction — making it one of the most expensive forms of short-term borrowing in personal finance.
Overdraft fees typically run around $35 per item, which means a $6 coffee can cost $41 — and several small transactions in one day can each trigger their own fee. Banks must obtain your explicit opt-in before charging overdraft fees on debit card and ATM transactions, so opting out is a right rather than a favour: the transaction is simply declined instead, at no cost. Two cheaper alternatives usually exist at the same bank: linking a savings account for automatic transfers, which carries a much smaller fee or none, or a line of credit that charges interest rather than a flat penalty. A small buffer in checking and low-balance alerts prevent most of it.
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