What Is a Prepaid College Meal Plan? Everything You Need to Know

With a prepaid college meal plan, students pay in advance for the meals they’ll eat on campus during the semester. There are usually different types of meal plans to choose from that offer a specific number of meals per day or week.

Prepaid meal plans are convenient, but they can also be costly. Here’s what college students need to know about prepaid college meal plans, including the different types, the costs, and how to choose the best plan.

How Do College Meal Plans Work?

A college meal plan is a prepaid account students use to get meals. There are different plans to choose from, and each plan provides a certain number of meals daily or weekly. Meal plans may cover one to three meals per day, for example.

Besides traditional dining halls, a meal plan might allow students to eat at on-campus cafes and restaurants or to purchase to-go foods. Every time a student eats at one of these establishments, they swipe their college ID card and the meal is deducted from their meal plan account.

Before the academic year begins, students receive information about the types of meal plans available at their college and choose the plan they prefer. At some schools, first-year students may be required to sign up for the standard or default meal plan, which is typically the most comprehensive option.

How Much Is a Meal Plan in College?

According to the Education Data Initiative, the average college meal plan costs $570 a month. The specific cost of meal plans depends on the college or university, and prices can vary widely.

For instance, at Pennsylvania State University, the standard or default meal plan, which is called a level 2, costs $2,803 for the 2024-2025 academic year.

At the University of Chicago, the default meal plan every first year student is required to sign up for is $2,660 per quarter for 2024-2025, adding up to almost $8,000 for the fall, winter, and spring quarters.

These expenses are typically included in a school’s cost of attendance (COA), which is what the amount of financial aid a student receives is based on after they submit their Free Application for Federal Student Aid (FAFSA).

If your financial aid doesn’t cover all the costs of college, you may decide to take out private student loans to cover the gap.

A student loan payment calculator can help you determine what your payments may be for these and other types of student loans.

Types of College Meal Plans

Colleges and universities offer a variety of meal plan options. These are two of the common meal plan types.

Bulk Meal Plan Options

A bulk meal plan allows students to get a large quantity of meals from campus dining halls, restaurants, and cafes. You might be allotted 170 meals or more for the semester, and you can use them whenever you wish. This can be advantageous if you don’t plan to eat on campus for every meal. You might not need traditional breakfasts, for example, if you typically eat an energy bar on your way to class in the morning. Or perhaps you tend to eat off campus on the weekends.

Flexible Meal Plan Options

Some colleges and universities offer flexible meal plans that lets students buy hundreds of dollars of meals that can be redeemed at various places on campus. Other flexible plans may charge less for fewer meals. A flexible plan might also give students the option to make changes to the plan by adding more money for additional meals.

What Is a Block Meal Plan in College?

Block meal plans allow you to choose a set number of meals for a semester, rather than a certain number of meals per week. You can eat your meals whenever you choose, though these plans may limit you to certain dining halls. Meals on block plans may not carry over to the next semester, so if you don’t use them during the current semester, you lose them. Check with your school for the specifics of their block plan.

Some colleges and universities also offer “dining dollars” as part of a block plan that you can use to purchase meals or snacks. These dollars may or may not carry over to the next semester, so again, check with your school about the details.

Recommended: How to Get Out of Student Loan Debt

Are College Meal Plans Tax Deductible?

As of 2020, certain college expenses, including meal plans, are no longer tax deductible. But there are other tax breaks you may be able to take advantage of, such as the American Opportunity Credit or the Lifetime Learning Credit.

•   American Opportunity Tax Credit: This credit is for qualified expenses for dependent students, such as tuition and required fees, books, supplies, and equipment. The amount you may qualify for is 100% of the first $2,000 of qualified expenses plus 25% of the expenses in excess of $2,000, up to a maximum annual credit of $2,500.

However, the credit isn’t available to everyone. If your parents’ adjusted gross income exceeds the threshold of $80,000 for single tax filers, or $160,000 for married joint tax filers, you cannot take advantage of the credit.

•   Lifetime Learning Credit: To qualify for this, you must pay qualifying tuition and fee payments to a postsecondary institution; this includes course-related books, supplies, and required equipment. You can claim a maximum credit of 20% of up to $10,000 in eligible costs for a maximum $2,000 credit. The income limits for this credit are $90,000 for single filers and $180,000 for married joint filers

Check with a tax professional for more information about your eligibility for the American Opportunity Tax Credit and the Lifetime Learning Credit.

Another tax credit you may be eligible for once you start repaying your student loans is the student loan interest deduction. This deduction allows you to reduce your taxable income by up to $2,500. There are income phaseouts, however, based on your modified adjusted gross income (MAGI).

And know this: When the time comes to repay your student loans, it’s possible to refinance student loans for lower interest rates and different terms, if you qualify. When you refinance, you replace your old loans with a new loan with a private lender. The new loan will have new terms.

If you have federal loans, refinancing them means you will lose access to federal programs, such as income-driven repayment plans and federal student loan forgiveness, so consider that carefully if you think you might need these programs.

You can also look at your federal student loan interest rates to see if replacing those loans with a new loan makes sense financially.

If you believe you might be eligible for student loan forgiveness and you’d like to learn more, check out our student loan forgiveness guide.

Are College Meal Plans Worth It?

Whether college meal plans are worth it depends on how you use them. They are convenient and can save you time and effort. You don’t have to worry about shopping and cooking every day. Also, you may not have a choice about using a meal plan — some colleges require students to be on a meal plan, particularly if they live on campus.

However, meal plans are expensive. Be sure to weigh the cost when choosing a plan, and select one that makes sense for you so that you don’t have meals that you’ve prepaid for left over at the semester’s end.

Recommended: Student Debt by Major

What Happens if You Don’t Use All Your Meals?

If you don’t use all your meals, you may or may not be able to roll them over to the next semester. The rules vary from school to school. Some institutions have a use-it-or-lose policy for meal plans, meaning you can lose money if you have unused meals at the end of the semester. Other schools may allow you to roll over your extra meals to the next semester.

Check with your school to find out their policy.

Can You Get a Bigger Meal Plan?

Typically, you can upgrade to a bigger meal plan if you decide the plan you chose is not substantial enough for you. Some colleges may even allow you to start with a larger meal plan and then switch to a lower-cost one later, if you find you aren’t eating as many meals on campus as you thought you would. But again, the policies vary by school.

College Meal Plans Pros and Cons

Meal plans have benefits, including convenience, but they have disadvantages as well. Here are some of the perks and drawbacks to consider about college meal plans.

Alternative Options for a College Meal Plan

At some colleges you may be required to select a meal plan if you live on campus. However, if a meal plan is not mandatory at your school, you could choose one of the following options instead.

•   Make your own meals. If you have a microwave and small refrigerator in your dorm room, you may be able to prepare many of your own meals. Just remember that you’ll need to grocery shop, cook, and then wash all the dishes afterward.

•   Live off campus: If your college or university allows, you might choose to live in an apartment off campus. In that case, you’ll likely have a full kitchen, which will make it much easier to prepare your own meals. And if you have a roommate, you can split the cost of food and the prep work and cleanup, too.

The Takeaway

Prepaid college meal plans are convenient and schools may offer flexible options that let you tailor a meal plan to your eating habits. However, these plans can be expensive. And if you have meals left over at the end of the semester, you may not be able to roll them over, which means you’d be losing money.

The cost of meal plans is something to keep in mind as you’re figuring out your college financing options. And if you’re taking out student loans to help pay for college, remember that you have the option to refinance them later, potentially for better rates and terms if you qualify.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

photocredit: iStock/RossHelen
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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

When Jennifer S. clocked in on her first day of work as a nurse at a major hospital, she remembers thinking, “I’ve got this.” And she did. Nursing school had prepared her well for working in the emergency room.

She felt less confident about navigating her finances, however. Jennifer had to balance her living expenses and long-term goals with $40,000 in student loans while earning $25 an hour.

She cooked meals at home and kept her expenses low. Jennifer also created a monthly nursing budget to help organize her finances. “I saw that I should start saving a little more during the second half of the month, when I usually had leftover money, in case I needed it for the next month’s bills,” she says.

In addition, Jennifer discovered ways she could make extra money. Consider this nursing budget example: She switched to overnight shifts making an additional $7,000 a year. When a hurricane hit her state, she worked around the clock at the hospital for a week — and earned roughly $6,000, which she put toward a down payment on a home. And she routinely picked up per diem and travel assignments.

Why You Need a Nursing Budget

It’s an interesting time to be a nurse. On one hand, staffing shortages and burnout worsened during the pandemic, and the nursing shortage is expected to continue to grow until 2035. The rising cost of higher education, including how to pay for nursing school, has resulted in a growing number of students graduating with debt.

According to the latest figures from the American Association of Colleges of Nursing (AACN), roughly 70% of nurses take out nursing student loans to pay for school, and the median student loan debt is between $40,000 and $55,000.

On the plus side, nurses have some leverage. The profession is in such high demand right now that some hospitals are offering incentives like sign-on bonuses, shorter hours, and student loan repayment help.

And in general, nurses can earn a good salary. According to the latest data from the U.S. Bureau of Labor Statistics, the median income for a registered nurse in 2023 was $86,070. The median income for a licensed practical nurse or licensed vocational nurse was $59,730. The median income for a nurse anesthetist, nurse midwife, or nurse practitioner — fields that typically require a master’s degree — was $129,480 per year. Nurses who are willing and able to take on additional shifts, work overnight, or accept lucrative travel assignments stand to make even more.

If you’re a new nurse who is figuring out your finances, a nursing budget is a good place to start.

How to Budget as a Nurse

With tens of thousands of dollars’ worth of student loans to repay, it’s helpful for nurses to create a budget to manage their money, cover their living expenses, pay down the debt they owe, and plan for their financial future. Here’s how to do it.

•   Set financial goals. Think about your short-term and long-term aspirations. These might be things like saving $2,000 in your bank account, paying off your student loans, or investing for retirement. Knowing what you’re working toward will help give you the motivation to get there.

•   Calculate your income. Look at your pay stubs to see how much you’re bringing home each month. That’s the amount you have to work with.

•   Determine your expenses. Pull out all your bills and add up how much you’re spending each month for rent, food, utilities, loan and credit card payments, and so on. Be sure to include “fun” expenses such as dining out, entertainment, and self-care costs.

•   Find a budgeting method that works for you. There are different types of techniques, such as the 50/30/20 rule that divides your budget into different categories: 50% for essential expenses like rent, utilities, food, car payments, and debt payments; 30% for discretionary expenditures such as eating out, travel, and shopping; and 20% for goals like saving for a home, your child’s education, and retirement. There’s also the envelope budgeting system, which has you put cash monthly into envelopes for each spending category like housing and food. Once the money in an envelope is gone, you’ll need to wait until the next month to spend in that category again or take money from another envelope. Explore the different methods and choose the one that works best for your lifestyle.

•   Review your nurse budget regularly and update it as needed. Make adjustments as your situation changes. For instance, maybe your car breaks down and you need extra money for emergency repairs. Or perhaps you get a raise that increases your income. Tweak your budget accordingly.

Common Financial Challenges for Nurses

As a nurse, you’ll face some unique money-related challenges. For example, you may have work expenses, such as purchasing a uniform, comfortable shoes, and certain tools to do your job. Many hospitals and clinics require you to buy your own stethoscope, for instance. And working long shifts or irregular hours may leave you with less time for cooking so that you end up spending more money on takeout.

In addition, as a nurse, you may decide to pursue an advanced degree like a master’s to move up the ladder and earn more money. That could mean taking out new student loans to cover the cost of your continuing education, in addition to the loans you already have.

These financial challenges are all things to factor into your nurse budget so that you have a plan for paying them off.

Watch Your Spending

Even when you’re on a budget, it can be easy to fall into the habit of overspending because there are different ways to supplement your income as a nurse. “When I was doing travel assignments, I just kept working,” Jennifer says. “At the time, I didn’t realize it would stop, so I didn’t think to save as much as I could have.”

In fact, lifestyle creep can be a common pitfall, especially when you start earning more money, says Brian Walsh, CFP, senior manager, financial planning for SoFi. Spending more on nonessentials as your income rises can potentially wreak havoc on your savings goals and financial health. That’s why budgeting for nurses is so important.

While you’re starting to establish your spending habits, Walsh recommends using cash or a debit card for purchases. Automate your finances whenever possible by doing things like pre-scheduling bill payments.

Develop Your Savings Strategy

A sound savings plan can help you make progress toward your short- and long-term goals and provide a sense of security. Walsh suggests nurses set aside 20% of their income for retirement and other savings, like building an emergency fund that can cover three to six months’ worth of your total living expenses. He recommends placing it in an easy-to-access vehicle, like money market funds, short-term bonds, CDs, or a high-yield savings account.

The remaining 80% of your income can go toward current living expenses, including monthly student loan payments.

Jennifer found success by adopting a set-it-and-forget-it approach to saving. “Whenever I worked a per diem shift, I got in the habit of putting $100 or $200 of every check into a savings account,” she says. Before long, she had a decent-sized nest egg and peace of mind.

Explore Different Investments

One simple way to build up savings is to contribute to your 401(k) or 403(b) retirement plan, if one is available to you, and tap into a matching funds program. There’s a limit to how much you can contribute annually to one of these plans. In 2024, the amount is $23,000; if you’re 50 or older, you can contribute up to an additional $7,500, for a total of $30,500. In 2025, you can contribute up to $23,500 to a 401(k), and if you’re 50 or older, you can contribute an extra $7,500, for a total contribution of $31,000.

If you don’t have access to an employer-sponsored retirement plan, there are other ways to save for the future. “Start by figuring out what your targeted savings goal is,” Walsh says. If you’re going to save a few thousand dollars, you can consider a traditional IRA or Roth IRA. Both can offer tax advantages.

Contributions made to a traditional IRA are tax-deductible, and no taxes are due until you withdraw the money. Contributions to a Roth IRA are made with after-tax dollars; your money grows tax-free and you don’t pay taxes when you withdraw the funds in retirement. However, there are limits on how much you can contribute each year and on your income. In 2024 and 2025, you can contribute up to $7,000 to an IRA annually with an additional $1,000 for individuals 50 and up.

Ideally, Walsh says, you’re saving more than a few thousand dollars for retirement. If that’s the case, then a Simplified Employee Pension IRA (SEP IRA) may be worth considering. “Depending on how your employment status is set up, a SEP IRA could be a very good vehicle because the total contributions can be just like they are with an employer-sponsored plan, but you control how much to contribute, up to a limit,” he says. What’s more, contributions are tax-deductible, and you won’t pay taxes on growth until you withdraw the money when you retire.

Another option is a health savings account (HSA), which may be available if you have a high deductible health plan. HSAs provide a triple tax benefit: Contributions reduce taxable income, earnings are tax-free, and money used for qualified medical expenses is also tax-free.

Depending on your financial goals, you may also want to consider after-tax brokerage accounts. They offer no tax benefits but give you the flexibility to withdraw money at any time without being taxed or penalized.

Take Control of Your Student Loans

You have different priorities competing for a piece of your paycheck, and nursing school loans are one of them. You may need to start repaying loans six months after graduation, and options vary based on the type of loan you have.

If you have federal loans and need extra help making payments, for example, you can look into a loan forgiveness program or an income-driven repayment (IDR) plan, which can lower monthly payments for eligible borrowers based on their income and household size.

If you’re struggling to make payments, you may qualify for a student loan deferment or forbearance. Both options temporarily suspend your payments, but interest will continue to accrue and add to your total balance.

You can also explore the option of student loan forgiveness. There are a number of student loan forgiveness programs for nurses, such as the NURSE Corps Loan Repayment Program. If you work for a government or nonprofit organization, you can look into the Public Service Loan Forgiveness Program to see if you qualify.

Chipping away at a student loan debt can feel overwhelming. And while there’s no one-size-fits-all solution, there are a couple of different debt pay-off approaches you may want to consider. With the avalanche approach, you prioritize debt repayment based on interest rate, from highest to lowest. With the snowball approach, you pay off the smallest balance first and then work your way up to the highest balance.

While both have their benefits, Walsh says he often sees greater success with the snowball approach. “Most people should start with paying off the smallest balance first because then they’ll see progress, and progress leads to persistence,” he explains. But, he adds, the right approach is the one you can stick with.

Consider Whether Student Loan Refinancing Is Right For You

When you choose refinancing, including medical professional refinancing, a private lender pays off your existing loans and issues you a new loan. This combines all of your loans into a single monthly bill, potentially reduces your monthly payments, and may give you a chance to lock in a lower interest rate than you’re currently paying. A quarter of a percentage point difference in an interest rate could translate into meaningful savings if you have a big loan balance, Walsh points out.

A student loan refinancing calculator can help you determine how much refinancing might save you.

Still, refinancing your student loans may not be right for everyone. By choosing to refinance federal student loans, you could lose access to benefits and protections, like the current pause on payment and interest or federal loan forgiveness plans. Be sure to weigh all the options and decide what makes sense for you.

Recommended: Student Loan Refinancing Guide

The Takeaway

Nursing can be a rewarding career, with flexibility and opportunities to add to your income. However, as a new nurse, you are likely trying to stretch your paycheck to cover student loan debt and everyday expenses. Fortunately, by using a few smart strategies, such as budgeting and saving, and exploring options like refinancing, you can start to pay down your loans—and reach your financial goals.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

Photo credit: iStock/FatCamera

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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It’s possible to overdraft your account with a debit card if you have signed up for your bank’s overdraft coverage, which can enable a transaction to go through even when the account is short of the funds needed to cover it. However, you may wind up paying expensive overdraft fees on your purchase or withdrawal.

Overdraft fees have been around for so long now, many consumers may simply accept them as a cost of doing business with their bank or credit union. But you may not want to do so. Read on for a closer look at what opting into your bank’s overdraft service could mean specifically for debit card transactions.

What Does It Mean to Overdraft With Your Debit Card?

Overdrafting with a debit card means that you may spend more money than you actually have in the account.

If you don’t have enough money in your bank account to cover a debit card transaction, you can expect one of two things to happen.

•  Your bank may decline your request, leaving you empty-handed at the cash register or ATM.

•  Your bank could allow the transaction to go through. Technically, you will have overdrawn your account, because your account balance will fall below zero. But you’ll get what you wanted — some cash, a latte, movie tickets, etc. And you’ll be saved from potential embarrassment in front of co-workers or friends.

The second outcome may seem more satisfying, at least for the short-term. But there’s a catch: Your bank may only let the transaction go through if you participate in its overdraft coverage or protection program, and you can be charged a fee for this service.

What Is Overdraft Coverage vs. Overdraft Protection?

Many financial institutions offer overdraft programs that will let your transactions go through, at least temporarily, if you don’t have enough money in your account. But the rules — and fees — for this service can vary significantly from one bank and bank account to the next, so it’s important to understand what you’re signing up for.

Standard Overdraft Coverage

Many banks offer some type of standard overdraft coverage for their consumer checking accounts. Generally, if you overdraw your account with a check, automatic bill payments, or recurring debit card transactions, the bank may process the transaction anyway (at its discretion and usually up to a certain limit). But it will typically cost you: Your bank may charge an overdraft fee. And you’ll still have to get your account back in the black ASAP to avoid multiple fees. So while you can overdraft a debit card with no money in your account, it can get pricey.

Overdraft Protection

Overdraft protection services work a little bit differently. With this type of program, you can designate a backup account (a savings account, credit card, or line of credit, for example) to cover any shortfalls. The bank will automatically transfer money to your overdrawn checking account.

You’ll likely still be charged for this service, but this “transfer fee” may be lower than the bank’s overdraft fee. Before opting into any overdraft program, it’s important to understand the specific terms and fees.

How Are Debit Card Overdrafts Different?

You may not have a choice when it comes to paying fees when you overdraw your account with a check or automated clearing house (ACH) payments. If the bank approves the transaction, you can expect to pay an overdraft fee. If it declines the transaction, you’ll likely face a non-sufficient funds (NSF) fee. This charge means that even though the transaction wasn’t completed, you still will pay for the inconvenience the bank experienced due to the situation.

But your bank can’t charge you fees for overdrafts on most debit card transactions unless you have specifically opted in to those charges.

Opt-In vs. Opt-Out Policies

Deciding whether you want or don’t want to pay overdraft fees on debit card transactions can be a pretty complicated decision. Policymakers at the Federal Reserve decided in 2010 to change the previous process that involved having to opt out of overdraft coverage (that is, customers could be automatically enrolled in the service). Since then, bank customers have to opt in by signing paperwork that says they understand the fees and they want their bank to process their debit card transactions even when they’re short of funds.

•  If you opt in to debit card and ATM overdraft coverage, you can expect withdrawals and purchases to go through even if you don’t have enough funds in the bank at the time of the transaction. But you will likely be charged a fee in exchange for this service. (See below for pricing specifics.)

•  If you don’t opt in to debit card and ATM overdraft coverage, you may experience one-time ATM withdrawals and debit purchases being declined if you don’t have enough money in your account at the time of the transaction. You can avoid paying an overdraft fee for those transactions, but it will be up to you whether you want to use a credit card or some other method to complete the transaction.

•  Keep in mind, though, that even if you don’t opt in to overdraft coverage for your debit card, you could still face fees. If you’re short of funds when the bank processes an automatic payment through your debit card — for a gym membership or subscription service, for example — you might face an overdraft fee if the bank chooses to complete the transaction. And if the payment is declined, you may be charged an NSF fee.

Recommended: How to Get a Debit Card

Costs and Fees Associated With Overdraft Services

Federal regulators have proposed lowering overdraft fees to as little as $3, but currently they average around $26 to $27. And though some banks don’t charge overdraft fees on checking accounts, 94% of accounts at financial institutions still have them, according to a recent survey. And they can run as high as $38 or so.

Some banks also may charge what are known as “continuous” overdraft fees, or daily overdraft fees. These are charges assessed every day the account remains overdrawn, and the fees can add up quickly.

Your bank may waive the fee on a smaller purchase. Also, if it’s the first time you’ve overdrawn your account — or it’s been a while since you did so — the bank might remove the fee if you call and ask.

Should You Overdraft With a Debit Card?

If you’ve opted in to debit card overdraft coverage, it may seem worth the risk of overdrafting if you need some quick cash or to fill your gas tank in a pinch when you’re low on funds. But if you have other resources (whether it’s a credit card or a piggy bank), you might want to tap those first. Keep potential fees in mind — not to mention the stress of knowing your checking account will have a negative balance — as you ponder this strategy.

Recommended: 10 Personal Finance Basics

How to Avoid Overdraft Fees

Understanding how opt-in overdraft coverage works is one way to avoid triggering unnecessary bank fees. But there are other proactive steps you may want to consider, as well, including the following:

Choose a Bank That Doesn’t Charge Overdraft Fees

Some banks don’t charge overdraft fees; often, they cover you up to a specific overdraft limit, such as $50. Others may offer one or two fee-free account options. (If bank fees overall are an issue for you, keep in mind that online banks often have lower costs than traditional brick-and-mortar institutions.)

Use Credit Cards for Emergency Expenses

If you have a relatively low-interest credit card or you’re able to pay off your credit card balance every month to avoid accruing interest, it may make sense to use your credit card for emergency expenses. Thinking about which card you’re going to use before an emergency comes up could help you make the best decision.

Link Accounts for Overdraft Protection

Linking your checking and savings accounts can allow your bank to quickly move funds to cover negative balances. Though you might pay a transfer fee, it’s usually less than an overdraft fee.

Build an Emergency Fund

Having an emergency fund that can cover three to six months’ worth of expenses is a good goal, but even a smaller amount of savings may allow you to deal with the kinds of unexpected expenses that can trigger debit card overdrafts. A high-yield savings account can help you grow your money while also keeping it accessible.

Steps to Help You Better Manage Your Debit Card

If the convenience of using a debit card has made it your go-to tool for accessing cash and making purchases throughout the day, there are steps you can take to prevent overdrafts.

Monitor Your Accounts

Using a tracking tool to monitor your checking account and other account balances, can help you avoid an overdraft.

Set Up Low Balance and Other Alerts

If your bank offers account alerts, consider setting up a notification so you know when your checking account balance is getting low.

Know When Your Bills Are Due

Putting together a budget can help you pay your bills on time and organize your payment dates. Then, you might also see if you can move some payment dates. For instance, you could ask your credit card issuer to shift your date. That way, your checking account won’t be drained due to having so many payments in the same pay week or pay period.

The Takeaway

You may be able to overdraft your debit card transactions if you have overdraft coverage. This means your bank will cover the transaction, but you will likely be charged a fee for this privilege. If you choose not to opt into your bank’s standard overdraft coverage, there’s a good chance that a debit card transaction that would take your account into a negative balance would be denied.

The rules and fees for overdrawing your account with a check, automatic payment, or debit card can vary significantly depending on where you bank, so it’s a good idea to read all the paperwork you receive when you sign up for an account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What happens if I overdraw with my debit card without overdraft coverage?

Here’s what happens if you overdraft with a debit card: If you don’t have overdraft coverage and you don’t have enough money in your bank account to cover the transaction you’re trying to make, your bank will likely decline the purchase or withdrawal. You won’t overdraft your account and you won’t have to worry about paying an overdraft fee, but you will have to find another way to finance your transaction or skip it.

How much does overdraft coverage typically cost?

Overdraft fees can vary depending on the bank and other factors, including whether you have a backup account or credit card linked to your checking account. One recent survey found an average fee of around $26 or $27. That said, there is a movement afoot to lower these fees considerably which may or may not impact future charges.

Can I overdraft using my debit card at an ATM?

If you’ve opted in to your bank’s overdraft coverage, your ATM withdrawal may go through, even if you withdraw more than you actually have in your account. You can expect to be charged an overdraft fee for this service. If you don’t opt in to overdraft coverage, the transaction will likely be declined, and you won’t be charged an overdraft fee, but you won’t be able to access the funds you’re seeking.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.