Best Banks With No Overdraft Fees in 2021

Have you ever been hit with an overdraft fee? Don’t be embarrassed; it happens to nearly everyone sooner or later. It can happen because you made a math error in your account, or even because you forgot to enter a payment in your records. And with debit cards connected to checking accounts, it can be difficult to keep an accurate count of every dollar that’s going out.

For that reason, we prepared our list of the best banks with no overdraft fees. And not only do these banks not have overdraft fees, but they also have features and services that make them more valuable to you than a typical checking account.

With that in mind, let’s move on to our list of the best banks with no overdraft fees.

Overview of the Best Banks With No Overdraft Fees

Banks with No Overdraft Fees Best For:
Chime Up to $100 in purchase overdrafts, free of charge
Aspiration Earn up to 5% cash back on socially conscious spending
Axos Bank Earn either 1% cash back on purchases or 1.25% interest on your balance
Capital One 360 Checking Brick-and-mortar bank branches
Ally Bank Invest where you bank
Discover Full-service, online banking with top credit card offers
Charles Schwab Link your checking account directly to your brokerage account

Best Banks With No Overdraft Fees

Chime

Why choose Chime? You’ll get up to $100 in debit card purchase overdrafts with no overdraft fees.

Chime may have the best overdraft policy there is with their SpotMe program. That’s because they’ll provide you with up to $100 overdraft protection on debit card purchases with no overdraft fee. (Any purchase that may overdraft your account for more than $100 will be declined.)

You’ll need to have total qualifying direct deposits of $500 or more each month to be eligible to participate in the program, but that’s not a very high bar. You can meet the requirement just by having your paycheck direct deposited.

But even apart from their industry-leading overdraft protection program, Chime is an excellent choice to bank with. Their checking account equivalent, Chime Spending, comes with a Visa debit card and check writing. And to help you save money, they offer debit card roundups, which credit the change on purchases to your savings. And with your debit card, you’ll have access to cash at more than 38,000 fee-free ATMs.

Meanwhile, they also offer their high-yield Chime Savings Account. Currently paying an annual percentage rate of 0.50%, this account comes with automatic savings features and no monthly service fees. That makes Chime one of the best banks to save money with. They help you accumulate savings, then pay you one of the highest savings account interest rates in the country.

Chime basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: None
  • Overdraft line of credit: No
  • Savings account transfers: No

Visit Chime or read more in our Chime Review.

Chime Disclosure – Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC.

Aspiration

Why choose Aspiration? An account with Aspiration will pay you up to 5% cashback on socially conscious spending.

Aspiration charges no overdraft fees. Instead, checks, ATM withdrawals, online transfers, or debit card purchases that might overdraft your account are declined.

They offer two accounts, Aspiration and Aspiration Plus. With Aspiration, you can choose how much you want to pay in monthly fees—even if it’s zero. You’ll get between 3% and 5% cashback on socially conscious spending, and even get a personal impact score to help you shop to match your personal values. You can set up roundups with the account, with the option to plant a tree with each roundup. And you can use your debit card at 55,000 free in-network ATMs.

Aspiration Plus comes with the same benefits and features as the Aspiration account. But you can get 10% cashback on socially conscious spending. In addition, you can earn up to 1.00% APY on your savings, and also get one out-of-network ATM fee reimbursement each month.

Aspiration basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: $0 to 7.99 per month
  • Overdraft line of credit: No
  • Savings account transfers: No

Visit Aspiration or read the full Aspiration Review

Axos Bank

Why choose Axos Bank? This bank will give you a choice of either 1% cash back on purchases or 1.25% interest on your balance.

Axos Bank offers three different checking accounts. Essential Checking has no fees and provides unlimited ATM fee reimbursements. And no fees means no overdrafts or non-sufficient funds fees. You can link an Axos Bank savings account to cover overdrafts. The account comes with a Visa debit card that you can use anywhere Visa is accepted.

Rewards Checking also comes with no monthly maintenance, overdrafts, or non-sufficient funds fees. You’ll also get the benefit of unlimited domestic ATM fee reimbursement. But perhaps the biggest benefit for this account is that it can pay up to 1.25% APY on your balance if you 1) receive monthly direct deposits of at least $1,000, and 2) use your Visa debit card for at least 15 transactions per month. This account requires a minimum of $50 to open.

Finally, there’s the Cashback Checking account. It has no monthly maintenance fees, unlimited check writing privileges, and provides unlimited domestic ATM fee reimbursement. But the real advantage of this account is that you can earn up to 1% cash back on signature-based transaction purchases. In fact, you can earn as much as $2,000 per month in cash back, but you will need to maintain a minimum average daily collected balance of $1,500. This account requires a minimum of $50 to open.

Axos Bank basic features:

  • Minimum opening deposit: $0 or $50
  • Monthly service charge: None
  • Overdraft line of credit: No
  • Savings account transfers: Yes

Visit Axos Bank or read more in our Axos Bank Review

Capital One 360 Checking

Why choose Capital One 360 Checking? This is the only bank on this list with brick-and-mortar bank branches—they have more than 750.

Capital One 360 Checking has no minimum deposit requirement and no monthly maintenance fees. You won’t even be charged transaction fees for foreign transactions. And you can use your debit card at more than 70,000 fee-free ATMs.

For overdrafts, Capital One 360 Checking will either 1) automatically decline the transaction that would cause the overdraft, 2) pay the overdraft and give you one business day to cover it (otherwise there will be a $35 overdraft fee), or 3) use a free savings transfer from your linked savings account.

Apart from Capital One 360 Checking, Capital One is a full-service bank. They offer a savings account and certificates of deposit (CDs), as well as auto loans and refinances, and business and commercial banking. They also offer one of the best lineups of credit cards in the industry.

Capital One 360 Checking basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: None
  • Overdraft line of credit: No
  • Savings account transfers: Yes

Learn More: How to Avoid Costly Overdraft Fees by Using a Savings Account

Ally Bank

Why choose Ally Bank? Invest where you bank, either using Ally Invest Managed Portfolios or through self-directed investing.

Ally Bank offers their Interest Checking Account, where (as the name implies) you can earn interest on your checking account balance. On balances under $15,000, you can earn 0.10% APY. On balances over $15,000, you can earn 0.25% APY. You’ll have access to more than 43,000 ATMs.

And like Chime, Ally Bank’s Interest Checking Account uses roundups to allow you to accumulate money for savings through your debit card purchases. Transactions will be rounded up to the nearest dollar, with the change transferred to your savings account.

Related: Best Round-Up, Automated Savings and Microsavings Apps

Even though Ally Bank is a fully online bank with no physical branches, it is a full-service bank. They provide savings accounts, money market accounts, CDs, mortgages, and auto and personal loans. But what they may be even better known for is investing. You can either have your money professionally managed at low cost with the Ally Invest Managed Portfolios robo-advisor or participate in self-directed investing through Ally Invest Self-Directed Trading.

Unlike other bank checking accounts on this list, Ally Bank does have an overdraft fee of $25. However, you can use their Overdraft Transfer Service to avoid this fee. If you sign up, they’ll automatically transfer available funds in $100 increments from a linked savings account to your Interest Checking Account. There is no fee for the service or the transfers. But you could be charged an overdraft fee if you have less than $100 in your savings account.

Ally Bank basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: None
  • Overdraft line of credit: No
  • Savings account transfers: Yes

Discover

Why choose Discover? Full-service online banking with one of the top credit card programs in the industry.

Discover is another all-online bank offering full-service banking. In addition to checking, they also offer a savings account, money market account, CDs, IRAs, and student, personal, and home loans. And like Capital One, they also offer one of the most popular series of credit cards in the industry with the Discover Card. Discover Card is famous for having one of the highest cash reward benefits in the entire credit card universe.

The Discover Checking Account has no monthly service fee, as well as no charge for standard checks or official bank checks, deposited items returned, stop payment orders, insufficient funds, or even account closure. All that, and the card offers 1% cashback on up to $3,000 in debit card purchases each month. Meanwhile, you can access over 60,000 ATMs nationwide.

For overdrafts, you can take advantage of Discover’s Overdraft Protection plan. You’ll link either an Online Savings or Money Market account to your Discover Checking Account. Funds will be transferred from the linked account into your checking account to cover shortfalls caused by online bill payments, electronic transfers initiated externally, and checks. If funds in the savings or money market account aren’t sufficient to cover the overdraft, the payment will be denied.

Discover basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: None
  • Overdraft line of credit: No
  • Savings account transfers: Yes

Visit Discover Cashback Debit or read the full review here

Charles Schwab

Why choose Charles Schwab? Directly link your checking account with your Charles Schwab brokerage account.

Best known for being the largest retail investment broker in the world, Charles Schwab also offers banking services through Charles Schwab Bank. That includes their High Yield Investor Checking account. There are no account minimums and no monthly service fees. In fact, they don’t even charge foreign transaction fees on your debit card.

Meanwhile, you’ll get unlimited ATM fee rebates worldwide, and even earn interest on your checking account balance. Your account comes with a Schwab Bank Visa Platinum debit card. At the same time you open your High Yield Investor Checking account, you’ll also be opening a Schwab One Brokerage account for investing.

On the overdraft front, Charles Schwab has no overdraft fees on its checking account. You can set up overdraft protection by linking a Charles Schwab savings account or a Schwab One brokerage account. If you link a brokerage account, the funds will be withdrawn from the account based on your cash balance in that account. But if you have a margin account set up, and there is insufficient cash to provide the overdraft protection, a margin loan against securities held in your brokerage account will be the source of funds for your overdraft protection.

The advantage of the margin loan arrangement is that the interest charged on the loan can be well below what is typically charged on a standalone overdraft line of credit offered by some banks.

Charles Schwab basic features:

  • Minimum opening deposit: $0
  • Monthly service charge: None
  • Overdraft line of credit: On broker margin accounts
  • Savings account transfers: Yes

Read more in our Charles Schwab Review

What Is Overdraft Protection and How Does It Work?

Overdraft protection is a program offered by some banks to reduce the chance a depositor will overdraw their checking account.

An overdraft occurs when funds leaving a checking account exceed the account balance. This can occur as a result of a check, funds transfers, online bill payments, debit card purchases, and even bank charges.

Once the account goes negative, the bank will charge an overdraft fee that can range anywhere from $20 to $40 for each item that exceeds the account balance.

But some banks offer overdraft protection to prevent that from happening. It typically works by linking a deposit account within the same bank, either a savings account or a money market account.

Some banks do offer overdraft lines of credit. In that case, the credit line will automatically be accessed by the bank to cover the shortfall in your checking account. Interest will be charged on the amount outstanding until it is repaid, and other fees may apply.

Some banks do charge overdraft fees if funds in the linked savings or money market account aren’t sufficient to cover the checking account shortfall. Others will simply deny the charge to the account, which will eliminate the need for an overdraft fee.

Learn More: Bank Fees And How To Avoid Them

How Did We Come up With This List?

The number of banks with no overdraft fees is extremely limited. Overdraft fees are just one of the litany of charges banks impose on their customers.

To come up with this list, we looked not only for banks that don’t charge overdraft fees (or offer workarounds) but also provide other valuable services. Many of those services are not offered with typical checking accounts.

Simply producing a list of banks that don’t charge overdraft fees isn’t enough. The checking accounts offered had to provide other tangible benefits to our readers to make this list.

Summary of the Banks and Special Features

Bank with no Overdraft Fees Minimum Opening Deposit Monthly Service Charge Overdraft Line of Credit Savings Account Transfer Overdraft Feature
Chime $0 None No No Will spot you up to $100 for an overdraft
Aspiration $0 $0-$7.99 No No Potential overdrafts are not cleared
Axos Bank $0 or $50 None No Yes No fee charged for overdrafts
Capital One 360 Checking $0 None No Yes Declining overdraft charge, cover the overdraft in one day or link a savings account
Ally Bank $0 None No Yes Funds transferred from a linked savings account in increments of $100
Discover $0 None No Yes Funds transferred from a linked savings or money market account, or denied
Charles Schwab $0 None Yes Yes Funds transferred from a linked savings or brokerage account

FAQs

The most popular explanation is to penalize customers who overdraw their accounts. The theory is that if a fee is attached to overdrafts, consumers will be less likely to incur them in the first place. There is some extra effort expended on the part of the banks when it comes to overdrafts, which partially justifies the fees. But mostly—and like nearly all bank fees—overdraft fees are primarily to generate additional revenue.

You’ll generally be better off with a linked savings account. This is due to the fact that an overdraft line of credit will incur interest charges. But if the funds are withdrawn from a connected savings account instead, no interest will apply. And even if it means you’ll forfeit some interest on your savings, it will only be for a short period of time. And since interest paid on most savings accounts is so low, the amount of forfeited interest will be insignificant. One other potential issue with an overdraft line of credit is qualification. If you have fair or poor credit, and the bank runs a credit check as part of the credit line qualification process, you may not be granted the line.

It really depends on the bank and your relationship with it. Often, a bank will waive the fee on the first overdraft you have on your account as a courtesy. Some may also waive the fee if you only have an overdraft occasionally, like no more than once each year. This will also be done as a courtesy, but it’s not a matter of policy. Subsequent overdrafts will incur fees. But beyond those limited situations, you should fully expect to pay overdraft fees any time you incur an overdraft.

Nope, banks don’t report overdrafts to the credit bureaus. Now, if you have an overdraft line of credit and you fail to pay the account as agreed, that could potentially be reported to the credit bureaus. It is, after all, a loan agreement. And as such, the bank will most likely report your payment history to whatever credit bureaus they report to. Even though banks don’t report overdrafts to the credit bureaus, you’ll still want to keep them as an infrequent occurrence—at least if you don’t have some form of overdraft protection to cover the shortfall. A bank may decide to close your checking account if you have too many uncovered overdrafts. That can even happen if you have overdraft protection. For example, if your linked savings account is empty or has insufficient funds to cover an overdraft of your checking account, it’ll be the same result as an uncovered overdraft. But the effect can be worse because the overdraft will now affect two accounts.

Bottom Line

If you’re shopping for a bank, it’s best to assume they do charge overdraft fees. That’s the whole purpose of preparing the list of banks with no overdraft fees in this guide.

Overdraft fees are an important consideration too. Sooner or later, nearly everyone overdraws their account. And when it does happen, it’s nice to know that your bank has your back and isn’t going to punish you with fees.

That’s what we believe the banks listed in this guide will do. Though one does have an overdraft fee, it’s easy to avoid. And the more banking fees you can avoid, the more money you’ll have in your account.

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