diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
index ff7a03bc5..2775f4def 100644
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -2534,8 +2534,37 @@ bool CWallet::CreateTransaction(const vector<CRecipient>& vecSend, CWalletTx& wt
                     return false;
                 }
 
-                if (nFeeRet >= nFeeNeeded)
+                if (nFeeRet >= nFeeNeeded) {
+                    // Reduce fee to only the needed amount if we have change
+                    // output to increase.  This prevents potential overpayment
+                    // in fees if the coins selected to meet nFeeNeeded result
+                    // in a transaction that requires less fee than the prior
+                    // iteration.
+                    // TODO: The case where nSubtractFeeFromAmount > 0 remains
+                    // to be addressed because it requires returning the fee to
+                    // the payees and not the change output.
+                    // TODO: The case where there is no change output remains
+                    // to be addressed so we avoid creating too small an output.
+                    if (nFeeRet > nFeeNeeded && nChangePosInOut != -1 && nSubtractFeeFromAmount == 0) {
+                        CAmount extraFeePaid = nFeeRet - nFeeNeeded;
+                        vector<CTxOut>::iterator change_position = txNew.vout.begin()+nChangePosInOut;
+                        change_position->nValue += extraFeePaid;
+                        nFeeRet -= extraFeePaid;
+                    }
                     break; // Done, enough fee included.
+                }
+
+                // Try to reduce change to include necessary fee
+                if (nChangePosInOut != -1 && nSubtractFeeFromAmount == 0) {
+                    CAmount additionalFeeNeeded = nFeeNeeded - nFeeRet;
+                    vector<CTxOut>::iterator change_position = txNew.vout.begin()+nChangePosInOut;
+                    // Only reduce change if remaining amount is still a large enough output.
+                    if (change_position->nValue >= MIN_FINAL_CHANGE + additionalFeeNeeded) {
+                        change_position->nValue -= additionalFeeNeeded;
+                        nFeeRet += additionalFeeNeeded;
+                        break; // Done, able to increase fee from change
+                    }
+                }
 
                 // Include more fee and try again.
                 nFeeRet = nFeeNeeded;
diff --git a/src/wallet/wallet.h b/src/wallet/wallet.h
index 1d1f84ebb..b9fa6bb24 100644
--- a/src/wallet/wallet.h
+++ b/src/wallet/wallet.h
@@ -48,8 +48,10 @@ static const CAmount DEFAULT_TRANSACTION_FEE = 0;
 static const CAmount DEFAULT_FALLBACK_FEE = 20000;
 //! -mintxfee default
 static const CAmount DEFAULT_TRANSACTION_MINFEE = 1000;
-//! minimum change amount
+//! target minimum change amount
 static const CAmount MIN_CHANGE = CENT;
+//! final minimum change amount after paying for fees
+static const CAmount MIN_FINAL_CHANGE = MIN_CHANGE/2;
 //! Default for -spendzeroconfchange
 static const bool DEFAULT_SPEND_ZEROCONF_CHANGE = true;
 //! Default for -sendfreetransactions