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Overdraft protection sounds pretty great. After all, it’s got the word protection right in the name.
But it might not actually provide the protection you’re looking for or think you’re getting, and can actually lead to additional bank fees or costs at some companies.
We are doing things differently at Varo with No Fee Overdraft. We give you the peace of mind of being able to overdraft your bank account by up to $50 if you meet the eligibility requirements* — but you never pay a fee to do it.
That means even if you’re running short on funds in your bank account a few days before payday, you can still cover your basics like getting that tank of gas or groceries.
When you don’t want to use the service or are not ready to meet the eligibility requirement, we still have your back. If you don’t have sufficient funds in your account, we simply decline the transaction.
Whether you use our No Fee Overdraft service or not, it’s our way of helping keep your money in your pocket — not put money in ours. Your financial health is our most important priority.
What is an overdraft?
So what is an overdraft anyway? An overdraft can occur when there isn’t enough money in your checking account to cover a transaction, such as a debit card purchase, ATM withdrawal, or other kind of payment.
At some banks, there could be a fee for overdrafting your account. This is a bit of a double whammy — getting charged money for not having enough money. In 2018 alone, consumers paid $34.5 billion on overdraft and non-sufficient funds (NSF) fees.
While a low account balance and overdrafts happen — we know what comes in and what goes out don’t always line up perfectly — we also believe you don’t need to add on additional fees when you’re already low on funds.
What does overdraft protection do?
Some banks offer a service called overdraft protection, which could help you avoid overdraft fees but that service may have other drawbacks or costs.
When you enable overdraft protection, you’ll generally have to link your checking account to another account at the bank, such as a savings account, credit card, or line of credit. If a purchase would overdraft your account, the bank will automatically transfer money from your linked account to cover the transaction.
Here’s the kicker, however: there may be a transfer fee or interest charges when you use overdraft protection. (Note: Not all banks do this but you’ll want to read the fine print closely.)
The protection transfer fee may be lower than a regular overdraft fee and you may only need to pay one protection fee per day versus paying multiple overdraft fees for multiple purchases.
Even so, you may be paying for protection. It can also be hard to follow the fine print on what happens inside your account and what’s actually going to happen.
When signing up for a bank account, the overdraft process and related fees can vary depending on the company providing the bank account and the type of coverage you choose. If your account stays overdrawn for several days, you may be charged an additional fee sometimes called an Extended Overdrawn Fee or a Balance Charge.
Always be sure to read the fine print as fees and charges vary from company to company — or, easier yet, find a bank account that just does not do fees at all. Which brings us to Varo.
How Varo does it better with no fees
If you meet the requirements for eligibility* and opt-in to No Fee Overdraft, any transaction that goes up to $50 over your bank account balance will clear — and best of all, there is no fee or penalty.
To stay qualified for this feature, repay the overdraft within 30 calendar days from when your balance first goes negative. You can automatically repay by making any deposit to your Varo Bank Account. As long as you’re eligible, you can turn No Fee Overdraft on or off whenever you want. Under Checking in the Varo app, tap Varo Bank Account > No Fee Overdraft.
If you are not using our No Fee Overdraft service, any type of transaction that brings your Varo Bank Account’s balance below zero will be declined and there is still no fee.
*To be eligible for No Fee Overdraft, customers must make at least 5 Varo Visa® Debit Card purchases each calendar month; and receive payroll or government direct deposits of at least $1,000 each calendar month into their Varo Bank Account. See Terms and Conditions.
Bank Account Services provided by The Bancorp Bank; Member FDIC.
The Varo Visa® Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc and may be used everywhere Visa debit cards are accepted.
Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s).