Do You Get Overdraft Coverage with Saving Accounts?

Do You Get Overdraft Coverage with Saving Accounts?

Written by Deepak Bhagat, In Business, Published On
January 31, 2023

It takes work to keep track of all the fees being charged by banks and credit unions these days. Although overdraft fees are common, it can be hard to tell if they apply to your savings account. So what exactly is an overdraft? Can you pay one way or another? How do you avoid paying those pesky fees? The article answers all of these questions and gives some advice on whether a bank with no overdraft fees is right for you!

What is an overdraft?

Overdraft Coverage with Saving Accounts

An overdraft is when you spend more than you have in your account. If you write a check for a purchase or withdraw cash from an ATM and need more money in your account to cover it, the bank will charge you a fee. It might also refuse to pay the merchant, meaning it can charge its own fee if they don’t take checks or cash.

This happens most often with checking accounts: some banks offer what’s called “overdraft protection” on checking accounts. An agreement between your bank and yourself allows them to transfer funds from another of your accounts into this one when there aren’t enough funds available.

Can You Overdraft a Savings Account?

Yes, you can overdraft a savings account. However, it is not recommended to do so. This means that if you have set up an overdraft protection plan for your savings account and then withdraw from the account that exceeds the amount in your checking account, it will pull from your savings instead.

However, there are some limits to this type of transaction:

  • You can only withdraw up to $500 in one day at most banks.
  • You will be charged an overdraft fee for each individual transaction that causes an overdraft on your savings account.

Ways to Avoid Overdraft Fees

Avoiding overdraft fees goes beyond simply being aware of how much money you have in your account. You should also ensure that you are only spending what you have, not more. For example, if a transaction causes an overdraft or NSF (non-sufficient funds) fee, it can be costly to pay off. For example, if a checking account is constantly used to cover purchases after the available balance has been depleted, this will eventually lead to closed accounts due to unpaid fees.

Savings Account or Checking Account?

If you have a savings account, overdraft coverage means that your bank will cover your checks and ATM withdrawals when you don’t have enough money in your account. This feature can be helpful if, for example, your checking account has been compromised or stolen and someone tries to make purchases on it without permission. However, it’s important to note that while overdraft coverage protects you from transaction fees when there’s no money in your checking balance to cover a purchase, the bank won’t refund any of the charges themselves. “To activate no-fee Overdraft Coverage, set up direct deposit with SoFi Checking and Savings.

Remember, overdrafts are a type of loan that you can opt into. You can choose whether or not to sign up for overdraft coverage when you open your account and how much coverage you want if you do decide to enroll. It would help if you also remembered that there are other ways to avoid overdraft fees, like setting up automatic transfers or alerts, so they don’t happen again. Ideally, though, it’s best to rely on something other than overdrafts at all because they’re expensive loans with high-interest rates!

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