Bank Overdraft Fees Effect on Credit Rating

Written by ciele edwards
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Bank Overdraft Fees Effect on Credit Rating
Only unpaid overdrafts will appear on a credit report. (Image by, courtesy of Casey Serin)

If you use checks or a debit card to make purchases without having the available funds in your bank account to cover the purchases, you will likely have to pay an overdraft fee. An October 2009 report on USA Today's website estimates that the average bank overdraft fee costs £17.3 Not paying overdraft fees can adversely affect your credit rating.

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The Facts

Your credit report does not contain evidence of your bank accounts or any banking activity. If an unpaid overdraft fee is sent to collections, however, it is no longer considered banking activity and can lower your credit score.


Your credit rating reflects your ability to repay agreed upon debts within a reasonable time frame. An overdraft fee, like a medical debt, is unexpected and will not appear on your credit report unless you choose not to pay.


An overdraft fee will often occur with every purchase that you make after your account is depleted--no matter how small those purchases may be. This can result in hundreds of dollars in overdraft fees accruing over the course of a day. Fees of this magnitude are often difficult for consumers to pay.


Even if your overdraft fees do not appear on your credit report, mortgage lenders will see evidence of the fees when reviewing your bank statements to determine if you are eligible for a mortgage. Frequent overdrafts will make you appear less responsible with money and may result in a mortgage lender turning down your application for a loan.


Not paying an overdraft fee can have consequences other than just a lower credit rating. You are likely to be entered in ChexSystems for nonpayment. ChexSystems Inc. keeps track of individuals who owe money to banks. Having your name in the system will make it challenging to find another bank willing to allow you to open an account for another five years.

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