What is Overdraft Protection
Overdraft Protection 101
What is it, why should I use it, and how can I get the most out of it?
Let’s set the scene: you’re next in line at the grocery store, you’ve got all your items ready to go, but then you start to panic. Do I have enough cash in my account to cover this? Uh oh, your items are totaled and it’s time to pay. That’s when the real Swipe-a-phobia sets in. Either you swipe and your payment is declined because you don’t have enough in your account, or you overdraft your account and get slammed with fees. Either way, it feels like your account is toast.
Enter overdraft protection1, here to save the day. But what is it and how can you use it without racking up fees? Well, buckle up, dear reader, because we’re taking you on a journey that will hopefully teach you a little bit about how to stay covered and confident with your money.
Table of Contents
What is overdraft protection?
How does it work?
How can I avoid overdraft fees?
How is GO2bank’s overdraft protection different?
What is overdraft protection?
Overdraft protection is a service your bank provides to protect you from having insufficient funds when it comes to swiping time. If you spend more than what you have in your account, the overdraft protection covers the purchase, but will typically charge a fee for allowing you to make your purchases. Overdraft protection will also typically limit how many overdrafts you can make in a certain period of time, and how many overdraft fees you can be charged.
How does it work?
Most banks offer overdraft protection, which can vary, but one thing they all have in common is you must opt in to receive the service. Some banks let you opt in right out of the gate after opening an account, which might seem like a good thing, but might also mean racking up overdraft fees quickly. . To stay covered at GO2bank, you need to first set up and receive eligible direct deposits before you can opt in. After you opt in, you’ll be given a coverage amount based on your past and present relationship with us, which includes your direct deposit’s frequency and amount.
Think of it this way: You’re buying school supplies and spend $135 at the store but only have $100 in your debit account. Your bank is kind of like that nice person in line behind you who says, “I got you” and spots you the extra $35 so you can make the purchase and get on with your day. But that person, aka your bank, still expects you to pay them back that $35, and expects you to pay a fee on top of it since they were so nice for loaning it to you. And if you go straight to another store and keep overdrafting your account, your bank will still protect you up to a certain amount but you can expect a fee each time you overdraft.
So, the trick is to find the nicest person behind you in line, aka GO2bank.
How can I avoid overdraft fees?
Before opting in for overdraft protection, your bank should let you know five important things:
- What type of transactions are covered
- How much the bank covers in overdraft protection
- How much your overdraft fee will be each time you overdraft
- How to avoid fees
- How many overdraft fees you can be charged in a day/month/statement period
Some banks, like GO2bank, offer a grace period if you return your balance to at least $0 within a certain amount of time. If you overdraft your account but have cash on hand or money stashed away in a savings account, you can add it back to your debit account to avoid getting hit with that overdraft fee.
The easiest way to avoid overdraft fees? Keep your account balance positive at all times. We know that can be easier said than done some months. But with the GO2bank app, you can set alerts2 to remind you that your balance is low, notify you when a direct deposit posts to your account, and more. This can help you keep track of your balance and avoid making any purchases you can’t cover on your own.
How is GO2bank’s overdraft protection different?
Compared to big banks, eligibility for overdraft protection is way easier with GO2bank, and we charge way less fees per month if you frequently overdraft your account. Once you set up eligible direct deposits and opt in, you won’t be charged an overdraft fee for any transaction that’s less than $5 or that overdraws your account by no more than $10. You’ll never be charged more than $150 in overdraft fees per statement period. And the more direct deposit you receive, the more you'll be covered in overdraft protection, even reaching up to $200 in coverage for every purchase. Because that’s what your GO2 is for.
Here's a helpful break down of what GO2bank's overdraft protection covers:
Types of transactions – Purchase transactions (no ATM, checks, fund transfers, or bill pay)
How much is covered – Up to $200
How much are fees – No fees if you overdraw $10 or less, otherwise $15 per overdraft
How many fees – Maximum of 10 fees ($150) per statement period / 10 overdraft transactions per statement period
How to avoid fees – Bring account to at least $0 within 24 hours of the first authorized transaction
Ready to get covered? Set up direct deposit and opt in here.
