The 6 Digital Banks With Overdraft

digital banks with overdraft

Over the years, traditional banks have charged customers a high overdraft fee when they overdraw their checking accounts. However, the digital disruption in the banking sector has introduced new models and policies around overdraft.

Digital banks have ushered in a new way of doing business by offering overdraft coverage at no fee to allow customers to spend more money than they have in the account. If you are looking for this service, here are some neobanks and Fintechs with an overdraft.


ally bank
  • No overdraft fees
  • Overdraft Transfer Service
  • Checking account
  • Savings account
  • Free ATM withdrawal
  • 0.55% APY with a High Yield CD
  • 0.5% APY on savings account
  • CD accounts
  • Personal loans and mortgages

Ally is one of America’s biggest digital banks. The digital-only banking division of Ally Financial Inc. offers its customers at no fee for all types of accounts. Every Ally Bank customer is eligible, and they have no restrictions.

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If you don’t have enough money in your account to cover a transaction, you can get overdraft coverage once you sign up for the Overdraft Transfer Service. This service automatically transfers available funds in $100 increments from your savings account or money market to cover your purchases.

Ally will move these funds to your checking account at no fee. Also, keep in mind that if you don’t set up this Overdraft Transfer Service and your card is declined, the bank will not charge you an overdraft fee.

You can sign up for this service by logging into your account and selecting the linked account you want to transfer funds to.

Apart from the checking account services, Ally also offers high yield certificates of deposit (CDs), mortgages, home loans, individual retirement accounts (IRAs), and investment advisory services through Ally Invest.

>> Ally Bank Review


chime bank
  • Fee-free overdraft with SpotMe
  • Savings account
  • Spending account
  • Credit builder
  • Two days early paycheck
  • 0.5% APY on savings accounts

Chime is an industry leader in the digital banking world. Established in 2013, this bank has one of the best checking accounts at no fee.

Chime offers its customers overdrafts at no cost via the feature SpotMe. If you need to draw more than you have in your account, the bank will spot you up to $200 on your cash withdrawals and debit card purchases.

To be eligible for SpotMe, you must be a U.S. citizen above 18 years. You also need to receive a single deposit of $200 or more in your Spending Account 34-days prior. 

Once you qualify, you can overdraw $20 on purchases and cash withdrawals for a start. The bank will then increase your limit up to $200 based on your account history, spending activity, direct deposit amounts, and frequency.

This limit will be displayed on the Chime mobile app, and the bank will send you notifications when your limit changes.

Although SpotMe doesn’t charge any overdraft fees, you might incur third-party costs with ATM transactions. The feature also doesn’t cover non-debit card transactions such as ACH transfers or Checkbook transactions.

As a top challenger bank, Chime provides its customers with a Chime Credit Builder Visa Credit Card to build their credit scores. With direct deposits, you can receive your paycheck two days early, and all your deposits are FDIC insured for up to $250,000.

>> Chime Bank Review


axos bank
  • No overdraft fees
  • Checking Account
  • Savings Account
  • Mortgages
  • Personal Loans
  • Earn up to 1.25% APY
  • No monthly fees

As one of the first challenger banks in the USA, Axos was founded in 2000. It offers five main checking accounts, Essential Checking, Rewards Checking, Cashback Checking, First Checking, and Golden Checking.

The bank doesn’t charge customers any overdraft fees if you have an Essential, Rewards, or Cashback checking account.

All these checking accounts also don’t have monthly maintenance fees and come with all the perks of online banking, including unlimited domestic ATM fee reimbursements.

Apart from the overdraft, Axos also offers customers other banking services such as commercial banking and lending, personal loans, mortgages, small business banking, and investing services. Their mobile app also helps you keep track of all the transactions on the go.

>> Axos Bank Review

Discover Bank

discover bank
  • Overdraft Protection
  • Online Savings Account
  • Checking Account
  • Certificate of Deposit (CDCs)
  • Money Market
  • Retirement Accounts

Discover Bank provides its customers with overdraft protection. With a Cashback Debit Checking Account, you can link your savings or money market account to your deposit account and transfer cash to cover your overdraft when you have insufficient funds.

Discover requires you to open a protected account and link it to a funding account to cover transactions such as ACH transfers, checks, and online bill payments through this protection. However, the bank has not extended this overdraft protection to transfers, ATM, and debit card transactions initiated at Discover.

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Customers don’t incur any fees when enrolling or using the overdraft protection service. You are also allowed to link one funding account to a specific protected account at a time.

Also, keep in mind that you are allowed to make six transfers or withdrawals each month from your savings or money market account. This is according to the federal regulations limit for telephone and electronic transfers.

Discover customers get 1% cashback on up to $3,000 in debit card purchases each month via the checking account. A savings account has an APY of 0.4%. Cash withdrawals at the Discover ATMs come at no fee. There are over 60,000 ATMs, which are easy to find.

Capital One 360

  • Overdraft Coverage
  • 360 Checking Account
  • 360 Performance Savings
  • Cash Back and Travel Cards
  • Auto loans
  • Business & Commercial Banking

Capital One 360 is an online bank that’s part of the Capital One brand. Once you open a 360 checking account, you can enjoy the benefits of overdraft coverage.

This overdraft coverage gives the customer control to decide what they want to do when the account balance is at zero. If you wish to withdraw cash, schedule a payment or make a purchase, Capital One 360 has several options to cover your checking account.

Once you log into your account and go to overdraft settings, you can select Auto Decline, which will automatically reject any transactions if your account does not have enough balance to cover the transaction. 

You can also select Free Savings Transfer. This option automatically transfers funds from your money market or savings account and uses the money to pay for the purchase. You can do this either via the Capital One website or the mobile app.

The other alternative is the Next Day Grace. Capital One gives you a full business day as the grace period to transfer the amount you’re overdrawn into your checking account. Unfortunately, the bank will charge you a $35 late fee if this period lapses before you effect the transfer.

Capital One 360 provides several alternatives to help you avoid paying for overdraft. Apart from this service, this online bank allows you to open an account for free and access Capital One’s 70,000+ ATMs. 

With the mobile app, you can access banking services 24/7 from anywhere. In addition, you can use Touch and Face ID plus other security features to keep your money safe.

One Finance

one finance
  • Overdraft protection
  • Savings Pockets
  • Credit card builders
  • Earn unlimited 3.00% APY on Autosave
  • Early paycheck
  • No monthly fees
  • No ATM withdrawal charges
  • Loans at 1% per month/12% APR

One Finance is based in San Francisco, California, and was founded in 2019. As a bank that helps customers build a credit line and save, it has Savings Pockets. These Pockets are essential in overdraft protection.

With the Savings Pockets, customers can access overdraft on the Spend Pocket. If your account doesn’t have money to cover payments, it connects to this pocket to get some cash.

The overdraft is repaid with deposits into your Spend Pocket. However, if you want to extend a balance into the coming month, One Finance will charge you 1% interest a month at 12% APR. The bank may also increase your overdraft limit if you add a direct paycheck deposit to your One account.

Apart from overdraft, One Finance also provides Savings Pockets for customers to meet specific savings goals or expenses. In addition, you can also create and share a joint Pocket if you want to manage money together with a partner or family members.

One Finance has more than 55,000 fee-free Allpoint ATMs that customers can use to withdraw cash. They also have credit builders and personal loans.

>> One Finance Review

Overdraft Protection vs. Overdraft Coverage

These digital banks have found innovative ways to provide overdrafts to their customers. To make the service better, they offer either overdraft protection or overdraft coverage. As a customer, you also need to distinguish between the two features.

For both overdraft services, the bank will not automatically sign up. You have to opt-in for either of these services on your checking account to give permission to the bank.

  • Overdraft Coverage

With this feature, the bank will advance you cash to make a purchase when you don’t have sufficient funds in your checking account. In some cases, the bank will increase your limit depending on your account history.

  • Overdraft Protection

On the other hand, you can link your checking account to another account with funds such as the savings or money market fund with overdraft protection. The eligible funding account differs depending on the specific bank. In this alternative, if you don’t have enough funds in your checking account, the bank will transfer cash from your linked account to pay for the purchase.

How Can You Avoid Overdraft Fees

If your account always runs into low balances, here are a few tips to avoid overdraft fees.

  • Switch Banks

If you have accounts in a bank that still charges overdraft fees, especially the traditional banks, you can switch to a digital bank with better fees. Most of these digital banks will not charge you an overdraft fee and will offer some form of coverage and protection. Therefore, you don’t have to stick with an expensive bank, while there are other cheaper alternatives.

  • Track Your Account Balance

The simplest way to avoid paying any overdraft fees is by watching your account balance closely. Digital banks provide all the services via their websites or mobile apps, making it easy to track your spending and balances on the go. Use the available online banking tools to your advantage to ensure your account doesn’t run into negative balances.

  • Link Checking Account to Savings Account

If your bank has this alternative, you can link your checking account to the savings one. This way, the bank can transfer funds when you are running low on cash and need to purchase. Also, ensure your savings account has enough money to cover the necessary expenses.

  • Set up Bank Notifications

Another way to monitor your account and spending is by signing up for alerts and notifications via email or mobile apps. You can set up a low-balance alert to keep you in the loop about how much money is available in your account. Once you notice your funds are low, you can deposit more cash, minimize spending or cancel some payments in advance.

  • Avoid Overdraft Protection

According to federal law, banks cannot sign you up for overdraft protection unless you opt-in. Therefore, if you don’t sign up when opening your checking account, your card will only be declined when you withdraw cash or make a payment with insufficient funds.


Digital banks provide some of the best banking terms for customers. With benefits such as no fees on accounts and now overdraft at no cost, customers can enjoy a more seamless banking experience.

We have discussed some of the digital banks that offer overdrafts on their accounts. With a checking account, there are several available options that you can use to avoid paying overdraft fees. These challenger banks don’t charge fees and provide extra features on their overdraft for the benefit of their customers.

Each bank has a different approach. Before settling for one, consider all the options and how it suits your financial needs.

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As a Current mobile banking app affiliate, I get a commission at no cost to you if you decide to sign up through my links.

The Future of Banking

As a Current mobile banking app affiliate, I get a commission at no cost to you if you decide to sign up through my links.