Bank overdraft fee occurs when you exceeded your bank balance or what you called “overdrawn”.
This usually happens when you do not read fine prints when opening a bank account and you do not fully understand the things you are signing into. Overdraft fee comes from your overdraft protection. Overdraft protection is what banks offer when you are a good client and you do not always overdraw your account. This happens when, for example, you withdraw funds from your bank account like writing a check but did not review your current balance which is insufficient for the check you issued. Your bank will then supply your account with the balance so that your check won’t bounce. This should be paid back as soon as you receive the notice from the back.

However, there has been confusion about overdraft protection and courtesy overdraft. The first mentioned is granted by the bank free of charge and no daily fees but you are not sure if they will clear your overdrawn check or not. Meaning you are in their complete mercy. Courtesy overdraft however charges you an overdraft fee for every overdrawn check and charges an additional fee per day until you paid all overdraws which is, by the way, deadlier than you think but provides assured protection when needed. Bear in mind, those banks operates by rules so you should be familiar with these rules to avoid future inconveniences.

Overdraft protection is a good safety net to protect you when overdrawn.

-If you sign up for standard overdraft protection, your overdrawn check will be paid by the bank, with no charges for insufficient funds. You agree in advance to have the overdrawn amount deducted from your savings account, added to your line of credit, or charged to your credit card. You know the fees and interest charges ahead of time.

-Courtesy Overdraft or Bounce Protection–In addition to an overdraft fee of $35 to $40 for each check that exceeds your balance, many banks charge anywhere from $2 to $10 per day until you pay off the overdraft account balance. Some banks require you to pay the balance in as little as five or as many as 30 days.

-Traditional overdraft protection, banks don’t charge you a fee for insufficient funds. There may be a fee for the transfer to your checking account from your savings account or credit card, but it’s usually much lower than an insufficient funds charge. There’s also no daily fees with traditional overdraft protection, other than interest.

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