Why Varo Does Not Do Overdraft

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.

Varo has never had overdraft fees and recently has done away with all fees. (Oh hi, no-fee banking!)

If you don’t have the money, Varo doesn’t charge you a fee to run over, we simply decline the transaction. It’s our way of helping keep your money in your pocket — not put money in ours.

What is an overdraft?

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 2017 alone, consumers paid $34.3 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 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 an 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. 

Your other bank account options

When signing up for a bank account, the overdraft process and 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.  

Our recommendation: Always be sure to read the fine print as fees and charges vary from company to company — or find a bank account that just does not do fees at all.

We think Varo does it better

If any type of transaction would bring your Varo Bank Account’s balance below zero, we’ll generally decline the transaction to keep you from spending money you don’t have right now. On the rare occasion, a transaction is not declined and your account is overdrawn, we still won’t charge you a fee. We believe this is a win-win for most customers.



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.

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