Need cash quickly, even though you have insufficient funds in your checking account? If you have overdraft protection, you may be able to withdraw funds from an ATM, subject to your debit card overdraft limit. In this article, find out more about using your debit card when you have no money and also how overdraft protection works generally.
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Whether or not you can continue to use your debit card when your checking account is overdrawn depends on what arrangements you have in place with your bank.
If you have overdraft protection and you’ve told your bank to authorize and pay overdrafts for everyday debit card and ATM transactions, you may be able to continue overdrawing at your bank’s discretion.
Your overdraft limit for debit card transactions will depend on your bank’s overdraft practices and your credit history. If you overdraw your checking account regularly, your bank may only allow a small limit for overdrafts.
If you’ve been approved for an overdraft line of credit, your limit could be anywhere between $500 to $10,000 depending on your bank.
Overdraft protection is an add-on product that you can set up with your bank so that you can avoid payment rejection charges if you overdraw. There are a few different types to consider:
- Overdraft coverage – typically you’ll be able to go overdrawn (although that isn’t always guaranteed), but you’ll have to pay a fee every time. Even if you go overdrawn by just a few dollars, you could be charged around $35 on top. At times, this could make overdrawing annoyingly expensive. Most banks won’t impose a fee if you bring your balance positive by close of business the same day.
- Linked account overdraft protection – this is where you have overdraft protection in the form of a linked account, e.g. a savings account. When you overdraw, the funds are taken from your other account to cover your overdraft. Transfer fees usually apply, but these are generally lower than those associated with traditional overdraft protection. Capital One offers free savings transfers as one of their overdraft coverage options on their 360 online checking account.
- Overdraft line of credit – this is a revolving line of credit attached to your bank account to cover your overdrafts automatically. The fees work differently with this type of overdraft protection product – you’ll get charged interest on your outstanding balance, for as long as you borrow funds, rather than a fee each time. Annual fees may also apply.
Not all banks allow you to overdraw at an ATM if you have insufficient funds in your account. Here are a few that will:
- Bank of America – this bank may let you overdraw at one of their ATMs for specific ATM withdrawals. A $35 fee applies each time, and they’ll inform you at the ATM whether this service is available to you. Learn more here.
- Citizen’s Bank – if you enrol in their Debit Card Overdraft Coverage, you can overdraw at an ATM at the bank’s discretion; an overdraft fee will apply each time.
- Prosperity Bank – You’ll have to opt-in to authorize Prosperity Bank to pay overdrafts on ATM transactions, see more details on their Advantage Overdraft product here.
To avoid any problems with overdraft fees or payment rejections, you should take a few minutes to check with your bank to confirm what type of overdraft protection you have set up on your checking account (if any) and whether it meets your needs.
Ask about your debit card overdraft limit and whether your bank will allow you to overdraw at an ATM if you need to.
Bear in mind that it’s best not to overdraw too frequently. Overdraft protection can be helpful for enabling the odd transaction to go through when you have insufficient funds, but relying on overdrawing can cause you financial headaches in the long run.
*Disclaimer: the facts and figures stated in this article are correct at the time of publishing.