Why Varo has no overdraft fees

Links to external websites are not managed by Varo Bank, N.A. Member FDIC.

All Varo products and services mentioned below are contingent on opening a Varo Bank Account. Qualifications may apply.

Overdraft protection sounds like a win-win right? After all, it’s got the word protection right in the name. But, it might not actually provide the protection you expect, and can actually lead to additional fees or costs at some banks.

At Varo, we do things differently—our Varo Bank Account ditches hidden bank fees (including overdraft fees*), and helps you spend only what you have.

If you don’t have sufficient funds in your account to cover the charge, we simply decline or return the transaction. Even if you have a negative balance, we will not charge you an overdraft fee. It’s our way of helping keep your money in your pocket—not put money in ours, as your financial health is our most important priority.

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. Many banks charge a fee for overdrafting your account, which can feel like a bit of a double whammy—getting charged more money for not having enough money. 

Having a low account balance or accidentally overdrafting your account happens to even the best of us—we know what comes in and what goes out don’t always line up perfectly. 

But, we also believe you shouldn’t be forced to pay additional fees when you’re already low on funds. 

What does overdraft protection do?

Some banks offer a service called overdraft protection, which can help you avoid overdraft fees, but can also 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 overdrafts your account, the bank will automatically transfer money from your linked account to cover the transaction.

Here’s the kicker, there may be a transfer fee or interest charges when you use overdraft protection. It’s important to note that 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 and it can be hard to follow the fine print on what fees you’ll be charged and when. 

When signing up for a bank account, the overdraft process and related fees can vary depending on the bank 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 make sure to read the fine print, as fees and charges vary from company to company. Or, better yet, find a bank account that skips fees altogether, like Varo.

How Varo does it better with no fees

Like we said before, at Varo we don’t believe in charging you overdraft fees when you’re already low on funds. To help you spend only what you have, any type of transaction that brings your balance below $0 will be declined and there is still no fee. 

If you’ve had to pay overdraft fees or for overdraft protection in the past, isn’t it time for a bank that treats you better? By skipping overdraft fees and declining transactions using funds you don’t have, we can help you stick to your budget and avoid surprises like a negative balance or the shock of associated fees.

*We will decline or return transactions when you do not have enough money in your account to cover the charge. However, you could still end up with a negative balance if, for example, a transaction is approved for one amount, but then the actual charge is more than what you have in your account (like when you add a tip at a restaurant after the transaction for the meal was already approved). This could also include preauthorized ACH transfers that are scheduled, recurring and/or pending but have not yet settled. If your account balance remains negative, activity will be evaluated and your account could be closed. Even if you have a negative balance, we will not charge you an overdraft fee.

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.