Netspend lets cardholders overdraw their accounts, but only if they have previously enrolled in its overdraft protection service. Otherwise, Netspend does not allow you to go over the amount authorized on your card.
Netspend cards are prepaid debit cards that allow cardholders to make purchases worldwide using the pre-funded money deposited into their accounts.
How Netspend's Overdraft Protection Service Works
Netspend offers a free purchase cushion or overdraft buffer of $10. That means the cardholder will not immediately incur the typical overdraft charge of $15 if he goes over the amount on his card.
It's not a permanent free pass, however. The cardholder has a grace period of 24 hours to repay the negative balance before incurring an overdraft fee. For overdraft amounts over $10, the cardholder would incur a charge of $15 per occurrence, but that's capped to a maximum number of three fees in a calendar month.
This does not mean that Netspend will authorize every overdraft. Netspend's terms and conditions indicate that the company only pays overdrafts at its own discretion and does not guarantee payment of every overdraft transaction. Unauthorized overdraft transactions are declined and Netspend may charge fees for these declined transactions.
Enrolling in Netspend's Overdraft Protection Service
If you have a Netspend account, you can enroll in Netspend's overdraft protection service by accessing your account online or by calling Netspend directly.
The company has some eligibility requirements. To enroll in the Netspend overdraft protection program, you must receive direct deposits totaling at least $400 into your account within 35 days. You must also read Netspend's terms and conditions and agree to the electronic delivery of required disclosures.
You also have to have a valid email address so that Netspend can notify you of any changes to the program. Netspend activates your overdraft protection within 24 hours after you have completed all of the appropriate steps.
How Netspend Cards Work
Founded in 1999, Netspend offers reloadable prepaid cards: Mastercard and Visa. The company does not do a credit check on applicants, but it does require them to furnish proof of identity.
Netspend cards have no activation fees or require minimum balances. Because they are not a credit card that allows you to carry a balance, there are no interest charges or late fees. The company offers three plans, two of which charge monthly fees. The basic Pay-as-You-Go Plan does not, but cardholders are then charged transaction fees on individual purchases; the other two plans allow for fee-free purchases.
There is also a premier plan that charges no monthly account fee and allows for unlimited purchases, but it requires a minimum amount in monthly direct deposits.
Funds can be added to Netspend accounts through direct deposit, bank account transfers, Netspend card account transfers, or through NetSpend reload network locations. Paychecks, Social Security benefits and even Internal Revenue Service (IRS) income tax refunds can be deposited directly into Netspend accounts and onto cards.
Netspend card accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to the current coverage limit and the cards can be used at any site or locale that accepts MasterCard and Visa debit cards for transactions, including ATMs. (For related reading, see "How Netspend Works and Makes Money")