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Banks used to have (maybe have again, as the CFPB is now a husk) broad latitude to resequence transactions posted to your account, so instead of you thinking you'd have one overdraft in the example, $500 down to $400, then once into the negative, -$200, and one overdraft fee, the bank could post them so it was $500 to -$100, an overdraft, then all 5 small transactions were also overdrafts, allowing them to charge 6 overdraft fees.
In December 2024, the CFPB announced a proposed rule to cap overdraft fees for banks with over $10B in assets at $5 (OR treat the fee like a loan) and add additional regulations to avoid resequencing. On May 9th, last Friday, the president signed the resolution [1] to overturn the pending CFPB regulations, saving us from "unlawful government price caps" (ABA President Rob Nichols) and "harmed the very consumers the CFPB is supposed to protect" (Sen. Tim Scott, R, Banking Committee Chair).
Comparing it to a loan, e.g. a credit card, usual effective overdraft fees are something like 16,000% APY [2] ($35 charged to the average $26 overdraft, repaid in a few days). Those with poor finances often might use a debit card instead of a credit card, which they might not have access to. It's a cruel joke that those with a bit more financial privilege can pay for things via CC without having the money for ~30+ days (statement close + payment due date) for 0%, or if they let the debt ride, "only" 40% APY. Not 16,000% APY.
[0]: https://www.nytimes.com/2014/04/12/your-money/customers-can-...
[1]: https://bankingjournal.aba.com/2025/05/with-trump-signing-re...
[2]: https://files.consumerfinance.gov/f/documents/cfpb_overdraft...
Like, it should make no difference to the bank if I make N transactions each for amount S, or the other way around. Money is fungible, people!
If your credit is really good, it can be much lower than that. I haven't seen an interest rate even close to that high since I was in my early 20s.