Mobile banking apps are in a race to end overdraft fees. According to Moebs Services, a financial research firm, financial institutions earned $34.5 billion in 2018 from these fees, triggering a rise in complaints about unfair service costs. In the first half of 2019, about 1,200 customers filed objections with the Consumer Financial Protection Bureau about this.
The CEO of Varo Money, a leading banking app, recently noted with concern that the majority of overdraft fee revenue comes from those least able to afford it. A number of these customers were paying over $200.
Below are some of the top mobile banking apps that won’t charge customers for an overdraft.These no-fee accounts are big “pros” on the list of why digital custodians are ahead of the game when it comes to traditional vs. mobile banking.
Varo rolled out the “no overdraft fee” service at the end of 2019 to help customers avoid additional fees whenever their balance hits zero USD.
With the new policy, the banking app no longer requires customers to pay overdraft fees whenever their account balance is less than the amount they spend. They cover the difference without charging a fee for the service, although there is a limit.
Customers who make at least five debit card purchases per month and set up at least $1,000 per month can overdraft up to $50 without paying overdraft fees.
The Consumer Financial Protection Bureau predicts that the average overdraft amount among US citizens is around $50.
Chime is another mobile banking app that does not charge overdraft fees. They allow their users to overdraft up to $200 without paying a penny.
How often will Chime allow customers to get exposed? They have no set limits. This can be once or more than 20 times, provided the customer stays within their SpotMe® limit. The app will decline if the purchase exceeds this limit.
To be eligible for SpotMe, a customer must receive at least $200 in qualifying direct deposits in the previous 34 days. In addition, they must have activated their debit card.
Using SpotMe is free. However, customers can leave an optional tip after paying off their negative balance.
How it works
Step 1: Receive a notification in the banking app once the monthly eligible direct deposit reaches at least $200
Step 2: Activate the debit card
Step 3: The app applies the next deposit to the customer’s negative account upon arrival.
Cash App is a popular mobile banking application that allows its customers to overdraft without fees under specific circumstances [read review ].
The process is automatic. So, as long as the user qualifies, they can access the funds without doing anything.
Here are the two main cases where clients are often overdrawn:
This can happen if a user has a $0 balance in their CashApp, their friend sends a payment, and the same person later opens a charge dispute after using it. The balance becomes negative while the company investigates the transaction.
Buy more gas than balance
An overdraft applies if a customer pumps more gas than they can afford. This can be avoided by getting to know their balance before asking the gas station attendant to pump the merchandise.
Although the app does not charge overdraft fees, users should pay the amount due on time to prevent their accounts from being disabled.
Here are the methods one can use to clear the balance:
- Direct deposits
- Deposits from an account
- Credit card deposits
- CashApp User Deposits
Overdraft fees may seem small at first, considering that the average overdraft fee is around $30. However, they can add up over time and become one of the highest fees anyone can incur. Signing up for one of the banking apps above can help customers avoid overdraft fees.
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