Banks that let you overdraft right away (2024)

We all make mistakes, and sometimes they result in accidentally spending more than what you have in your bank account. Thankfully, many local and online banks let you overdraft right away, which means they’ll cover your transactions if you don’t have enough available money in your account.

However, overdraft fees can be expensive, so we’ve compiled a list of financial institutions that have reduced or eliminated these fees or offer low-cost overdraft protection.

Understanding overdrafts and how they work

An overdraft occurs when your bank covers a transaction you’ve made that would otherwise be rejected due to insufficient funds in your account. This could happen when you access the money in your account through writing checks, ATM transactions, debit card purchases and automatic bill payments.

Here’s an example of how an overdraft works: Let’s say you have $50 in your bank account and use your debit card to buy groceries totaling $120. In this case, your bank may still allow the transaction to go through by covering the $120 purchase but charging you an overdraft fee, such as $35, on top of the $70 overdrawn amount. Now, you must repay the bank $105 when you make your next deposit.

Criteria of banks that let you overdraft right away

To be eligible for immediate overdraft on your ATM and debit card transactions, you’ll have to enroll in overdraft protection. If you opt out of ATM & debit card overdraft coverage, your bank will decline your transaction instead of letting it go through if you don’t have enough money to cover it.

On the other hand, if it’s a check, ACH transaction or recurring electronic payment, banks and credit unions will allow you to overdraft immediately even if you didn’t enroll in overdraft protection.

Benefits of banks allowing immediate overdrafts

Consider these benefits of opting into overdraft protection if you’re wondering whether it’s a good idea:

• You’ll have access to cash when you need it most: Having overdraft protection ensures that you’ll still have access to some cash even when you’re experiencing a financial crisis, such as incurring unexpected expenses before your next paycheck arrives.
• You don’t have to worry about late fees from creditors: If you don’t have enough money in your bank account to pay for a credit card payment, you could incur late payment fees and damage your credit score. Opening an account with a bank that allows immediate overdrafts could prevent this scenario.
• Avoid the embarrassment of declined transactions: Having your card declined at checkout can be embarrassing. Having overdraft protection helps ensure that a transaction will always go through no matter how much money is in your checking account.

List of banks that let you overdraft immediately

Here are some of the best financial institutions that let you overdraft right away:

Ally Bank Spending Account

Ally eliminated overdraft fees for all of its accounts in 2021 and has not added any other fees to offset this change.

To protect you against unexpected overspending, the Ally Bank Spending Account offers two overdraft protection options. The first option allows you to transfer money from a linked Ally savings account or money market account into your checking account to cover a transaction, and the transfer will be rounded to the nearest $100. The second option is Ally’s CoverDraft service, which provides up to $250 in coverage in case of an overdraft.

SoFi Checking and Savings

SoFi doesn’t charge a fee if you accidentally spend more than you have. Instead, it covers up to $50 once you’ve set up a direct deposit of at least $1,000. Note that any debit card purchase exceeding this amount will automatically be declined. If you use this feature, your next deposit will automatically be applied to your negative balance.

To sign up for SoFi’s overdraft coverage, you must set up direct deposit with SoFi Checking and Savings. The online bank will automatically activate the overdraft coverage feature as soon as you qualify.

Alliant Credit Union High-Yield Checking

If you open an Alliant Credit Union High-Rate Checking account, you can access two overdraft programs: free overdraft protection or Courtesy Pay.

If you opt into free overdraft protection, Alliant Credit Union will automatically transfer money from your Alliant savings account to help you avoid accidental overdraft fees. Courtesy Pay works differently. You don’t need to link your savings account, and it’ll cover up to $600 for checks and electronic payments, but not debit card transactions. To be eligible for Courtesy Pay, you must have already been a member for six months and transfer at least $600 into your account each month.

Chime Checking

Chime Checking charges no overdraft fees, and you’ll get access to Chime’s SpotMe® program for no-fee overdraft. To qualify for this feature, you must make monthly deposits of $200 or more and activate your Chime Visa debit card. Once enrolled in the program, you’re given a $20 overdraft limit that can eventually be increased to $200.

Navy Federal Credit Union Free EveryDay Checking

Navy Federal offers three types of overdraft coverage options: Overdraft Savings Transfer which moves money from a linked share savings account to your checking account, Checking Line of Credit which charges an interest rate from 13.9% to 17.9% APR, and Optional Overdraft Protection Service which charges $20 per occurrence with a maximum charge of one overdraft fee per day.

Capital One 360 Checking Account

The Capital One 360 Checking Account allows you to choose from three overdraft options: Auto-Decline, Free Transfer and No-Fee Overdraft.

If you choose Auto-Decline, Capital One will automatically decline any transactions that could put your account in the red. With Free Transfer, Capital One will automatically transfer money from your linked savings or money market account to cover a transaction that will overdraft your account. You can also opt into No-Fee Overdraft, where the bank will approve certain transactions, including checks, electronic payments and recurring debit card transactions even if they’ll overdraft your account. You must deposit funds as soon as possible to cover the shortfall, but Capital One won’t charge you a fee.

Exploring online banks that allow quick overdrafts

If you prefer to manage your finances online, consider opening an account with online banks that allow you to overdraft immediately, like the Chime Checking Account and the Ally Bank Spending Account. When comparison shopping, make sure to consider factors beyond overdraft fees, such as account features, ATM network, customer service and minimum balance requirements. Don’t forget to compare other account-related fees like monthly maintenance fees, ATM fees and foreign transaction fees before deciding.

Management and prevention strategies for overdrafts

While the banks on this list charge little to no overdraft fees, that doesn’t mean you should neglect your finances and constantly let your account go in the red. Here are some helpful ways to manage your money better and prevent overdrafts.

Set up alerts

“Many banks and credit unions allow you to set up SMS and email alerts for different account activities, including when your account reaches a certain limit,” saidNia Adams, a certified financial education instructor at Perspectives.

So, if you haven’t already, set up an alert for every transaction that hits your account or if your balance falls below a certain limit. This way, you can easily stay on top of your finances and avoid accidentally overspending.

Use a budgeting app

A simple way to manage your finances better and ensure your account stays in the green is by creating a budget and sticking to it. You can use a budgeting app like PocketGuard or YNAB to plan your spending by assigning funds to specific categories every time you’re paid so that you don’t go over budget.

Organize your accounts

Adams also suggested maintaining separate bills and personal spending accounts to avoid accidentally overdrafting your account.

“Having separate accounts for monthly bills helps you ensure that all your important bills are paid every month and also helps you be more mindful of when your personal spending funds are depleted,” she said.

Keep a cushion

Perhaps the most straightforward way to prevent overdrafting your account is to keep a small cushion there.

“I recommend my clients keep one month’s worth of expenses in their checking accounts to give them a buffer,” said Kendall Meade, financial planner at SoFi.