Traditional banks typically charge about $34 per transaction for overdraft coverage service.

Chime and Varo banking customers who fall into the red with certain checking account transactions may find that their bank will cover them — and without a fee.

The two mobile banking firms launched similar no-fee overdraft programs within days of each other. These are the equivalent of the overdraft coverage service that traditional banks offer for a fee, typically around $34 per transaction — one of the steepest fees that banks charge.

How they differ

Chime’s SpotMe may cover customers whose checking accounts dip as much as $100 past the money available. Varo’s No Fee Overdraft program will cover transactions only up to $50 over the account balance.

Chime covers only debit card purchases, while Varo helps customers with purchases, transfers, checks and bill payments.

 Chime's SpotMeVaro's No Fee Overdraft
CostNoneNone
Maximum overdraft limit$100
Customers’ personal limits vary from $20 to $100, based on time as a Chime customer, account activity and deposit amounts.
$50
Transactions coveredDebit card purchases onlyDebit card purchases, online transfers, bill payments and checks
Who is eligible?Chime customers who:
  • Receive monthly direct deposits of $500 or more.
Varo customers who:
  • Receive monthly direct deposits of $1,000 or more.
  • Make at least five debit card purchases a month.

Options at other banks

Other banks have similar fee-free alternatives to traditional overdraft services, such as allowing customers to overdraw up to $5 before charging a fee. The prepaid debit card Netspend has a free program called a “purchase cushion” that may cover up to a $10 overdraft.

Netspend charges additional regular fees and lacks some of the banking features Chime and Varo offer, such as check-writing and a free ATM network. (To see more details, including about their free checking accounts, read NerdWallet’s Chime review and Varo review.)

More details

Both Chime and Varo require customers to have monthly direct deposits to use the programs, and Varo tacks on an additional qualification of making at least five debit card purchases monthly. Banks typically don’t require direct deposits or a set number of monthly payments for customers to take advantage of overdraft services.

Transactions that go past the banks’ overdraft limits or aren’t covered by the programs would be rejected without a fee. But even Chime’s and Varo’s limited bailouts could be helpful for customers. Across banks, debit card transactions that result in overdraft fees are often small; the median amount is $24, according to a study by the Consumer Financial Protection Bureau.

Neither Chime nor Varo offers other overdraft services common at many banks, such as overdraft lines of credit or overdraft protection transfers linked to a savings account. While these typically carry fees, they don’t have as low an overdraft limit as $20 or $50. You can find some banks with cheap overdraft programs.

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