What is the fastest way to get out of an overdraft?

First stop it growing by keeping each month’s spending inside your income, then pay down a fixed amount every month as if it were a bill. If the overdraft is large, a cheaper fixed-term loan can help, but only once spending is under control.

How much does an overdraft cost?

It depends on your bank and country. In Israel the cost is interest: in the Bank of Israel figures reported by Ynetnews, around 11.6% a year. In the US it is usually a fee per overdraft, with a median of $34 in a 2014 CFPB study. The overdraft cost calculator estimates it for your balance and rate.

Is it a good idea to take a loan to close my overdraft?

It can be, if the loan rate is clearly lower and you have already stopped the overdraft from growing. Otherwise you can end up with both a loan and a new overdraft. Compare the total cost, not only the monthly payment.

Can Balance pay off my overdraft or move money?

No. Balance never connects to your bank and cannot move money. It shows your forecast, a daily safe-to-spend number and upcoming bills, so you can make the decisions yourself.

Get out of your overdraft

Get out of your overdraft for good.

An overdraft is one of the most expensive ways to borrow, and one of the easiest to get used to. Here is a calm plan to leave it and stay out.

Show me the steps Overdraft cost calculator

The problem

Why the overdraft is so hard to leave

An overdraft rarely starts with a decision. One expensive month, a late salary or a surprise bill pushes the account below zero, and next month starts there too. After a while the minus feels like the normal starting point.

It is also expensive in a quiet way. In Israel, where the overdraft (the “minus”) is extremely common, banks were charging around 11.6% a year on it at the time of the Bank of Israel report, roughly twice the rate of other kinds of loans. In the US, the cost usually comes as a fee per overdraft rather than interest, and a 2014 CFPB study found the median fee was $34, often triggered by a purchase of $24 or less (many banks have since reduced these fees).

Because the cost is taken automatically, you never see a bill for it. That makes it easy to underestimate. The first step out is simply to put a number on it.

2.5M

Israelis were overdrawn, 39.3% of adults, owing about ₪10.7 billion in total.

Source: Ynetnews / Bank of Israel

11.64%

Typical yearly interest Israeli banks charged on the overdraft, about twice other loans.

Source: Ynetnews / Calcalist

$34

Median US overdraft fee in the 2014 CFPB study, usually on a debit purchase of $24 or less.

Source: CFPB

What you can do today

A 90-day plan to leave the overdraft

This works whether your overdraft is ₪2,000 or $5,000. The numbers change; the order does not.

1
Put a price on it
Check your statement for overdraft interest or fees over the last three months, or estimate it with the overdraft cost calculator. Seeing the yearly figure is often the motivation you need.
2
Stop it growing
For the next month, aim only to end no deeper than you started. List the bills due before payday and keep everyday spending inside what is left.
3
Use a daily number
Divide what is left for flexible spending by the days until payday. That is your safe-to-spend amount for today. It is much easier to keep than a monthly total.
4
Pay it down in fixed steps
Choose a fixed amount to clear each month, even a small one, and treat it like a bill. Even a few months of fixed payments makes a visible dent.
5
Compare a cheaper loan, carefully
If the overdraft is large, ask your bank whether a fixed-term loan at a lower rate could replace it. Only do this together with step 2; otherwise the overdraft simply fills up again.
6
Build a small buffer
Once you are at zero, keep a small cushion so one surprise bill does not send you back. Our guide to building an emergency fund shows how.

If you are struggling to cover essentials, talk to your bank early, or to a free, independent debt-advice service in your country. This guide is general information, not financial advice.

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