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The Money Burner

Overdraft: the loan you never applied for, at a rate no lender may advertise

The regulator worked out what it costs as an annual rate. The number is 8,273 percent, and it is not a figure of speech.

by · · 8 min read

You did not apply for it. You did not sign a term sheet, agree a rate, or receive a payment schedule. You bought something for eleven dollars with nine dollars in the account, and a few days later your paycheck landed and squared it. The bank charged you 35 dollars for those few days[1].

Any other lender would have to tell you what that costs as an annual percentage rate. The Consumer Financial Protection Bureau did the arithmetic for them: the implied APR of overdraft credit is 8,273 percent[2]. For comparison, the average rate on credit card accounts assessed interest was 22.15 percent in the second quarter of 2026[5] – and card rates are the ones everybody calls predatory.

Why the rate is so absurd

Because the fee is flat and the loan is tiny and short. Thirty-five dollars is not much as a fee. As the price of borrowing a few dollars for a few days, it is the most expensive credit sold in America, by a distance nothing else comes close to. The number is high for the same reason a two-dollar charge on a fifty-cent coffee would look absurd if you called it interest: the arithmetic simply reveals what the flat fee was hiding.

Where our own figure comes from

The big number above assumes one overdraft a month, at the median fee. The 35 dollars is the regulator's; the once-a-month is a placeholder, and it is yours to change. Nobody publishes an average number of overdrafts per household per year that we could verify, so we did not invent one. Put your own count into the calculator below – your statements will tell you, and the number is usually worse than the memory of it.

Run it with your own count

This calculation runs on our server and is not stored – neither your result nor your entry.

per week

$8.05

per month

$35

per year

$420

Once $35
Times per year (monthly) 12.00
Per year $420
Invested as a monthly amount $35
After the period, nominal $28,538
Of that, in today’s purchasing power $15,755

Assumptions behind this calculation

  • Assumed return per year: 5.0%
  • Assumed inflation per year: 2.0%
  • Period considered: 30
  • Calculated as if the annual amount were invested in twelve monthly instalments.

Set the amount to the fee your own bank charges – it is on the fee schedule, and it varies. Set the rhythm to how often it really happens. And then look at the long-run line at the bottom, which is the part that stops the argument: this is money that goes out and does not come back, in a way a purchase does not.

The part that has genuinely got better

This is a money burner that is shrinking, and saying so is what makes the rest of it credible. Reported overdraft and NSF revenue has fallen by 6.1 billion dollars a year compared with before the pandemic – which works out to about 185 dollars a year for the average household that overdrafts[4]. Banks dropped NSF fees, raised the amount you can be short before a fee triggers, and in several cases scrapped the fee entirely.

And yet consumers still paid more than 5.8 billion dollars in reported overdraft and NSF fees in 2023[3]. A market that has halved and still moves nearly six billion dollars a year was never a rounding error. It was a business line.

What we could not verify

Two things we wanted and left out. First: the share of accounts that pay the bulk of these fees – the CFPB has published work on frequent overdrafters, but its file server refuses automated requests and we could not read the document ourselves. Second: an average number of overdrafts per household per year. Where we could not open the page, the number is not in this article. That is the whole rule, and it costs us a good sentence here.

The one thing worth doing today

Overdraft coverage on debit card purchases is optional and always has been. You opted in – probably at account opening, probably in the same click as everything else. Opting out means a card that gets declined at the register instead of a purchase that goes through and costs 35 dollars. A declined card is a bad ten seconds. Thirty-five dollars is a bad ten seconds too, and it lasts until payday.

The second thing is the account itself. If the fee schedule you are on charges for overdrafts, monthly maintenance and out-of-network cash, you are paying three tolls to hold your own money – and that is a different article, which is here.

What you can do about it

  1. Turn off overdraft coverage on debit purchases today

    It is a setting, not a contract. In the app it usually sits under account services or overdraft preferences; on the phone it takes one sentence. With it off, a card that would push you negative gets declined instead. You lose the purchase and keep the 35 dollars, and you find out you were short at the moment it matters rather than three days later.

  2. Set the balance alert lower than feels necessary

    Most banks will text you when the balance drops below a number you choose. People set it at 25 dollars, which is exactly the moment it is too late to move money. Set it at 150. The alert is free, and the whole point of an overdraft fee is that it happens in the gap between what you thought was in there and what was.

  3. Ask for the fee back, once

    Banks reverse overdraft fees for customers who ask, particularly the first time and particularly for long-standing accounts. It is not a right and nobody has to say yes. It costs one phone call and the worst outcome is the position you are already in – which is a very good ratio for ten minutes.

  4. Move the buffer, not the behaviour

    If the account runs close to zero at the end of every month, the fee is a symptom. What fixes it is a small cushion that sits there and is not spent – smaller than the emergency fund people talk themselves out of building. Work out what yours would need to be with the emergency fund calculator, and start with one month of the fee you are currently paying.

Frequently asked

Is 8,273 percent a real number or a rhetorical one?

It is the regulator's own calculation, published in its December 2023 report on overdraft and NSF fees. It is real in the sense that it applies the same formula every other lender is required to apply. It is not a rate anybody quotes, because nobody sells overdraft as credit – which is precisely the point the calculation makes.

Why did you use once a month for the big number?

Because we needed a rhythm and nobody publishes a verifiable average. The fee is the regulator's figure; the frequency is a placeholder, and the calculator exists so you can replace it with your own. If it happens twice a year for you, the honest number is 70 dollars, and this article is a smaller problem than you thought.

My bank does not charge 35 dollars.

Good, and many no longer do. Thirty-five is the median among large institutions that charged one at the time of the survey; the spread is wide and several banks have dropped the fee entirely. Look up your own fee schedule – if yours is zero, this article costs you nothing but four minutes, and if it is not, you now know what to compare against.

Sources

  1. Overdraft and Nonsufficient Fund Fees (December 2023): the median overdraft fee was 35 dollars among the 119 banks and credit unions with more than 10 billion dollars in assets that charged one, Consumer Financial Protection Bureau, retrieved August 24, 2026.
  2. Overdraft and Nonsufficient Fund Fees (December 2023): the implied annual percentage rate of overdraft credit is 8,273 percent, Consumer Financial Protection Bureau, retrieved August 24, 2026.
  3. Data Spotlight: consumers paid more than 5.8 billion dollars in reported overdraft and NSF fees in 2023, Consumer Financial Protection Bureau, retrieved August 24, 2026.
  4. Data Spotlight: reported overdraft and NSF revenue is down 6.1 billion dollars a year against pre-pandemic levels, saving the average overdrafting household about 185 dollars a year, Consumer Financial Protection Bureau, retrieved August 24, 2026.
  5. G.19 Consumer Credit, Terms of Credit: average interest rate on credit card accounts assessed interest, 22.15 percent in the second quarter of 2026, Board of Governors of the Federal Reserve System, retrieved August 24, 2026.

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