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

Once enrolled in its overdraft service, Netspend offers a free purchase cushion or overdraft buffer of $10. That means that as the cardholder, you will not immediately incur the typical overdraft charge of $20 if you go over the amount on your card. It's not a permanent free pass, however. You have a grace period of 24 hours to repay the negative balance before incurring an overdraft fee. For overdraft amounts over $10, you would incur a charge of $20 per occurrence, but that's capped to a maximum number of five 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 transactions are charged no more than $50 if Netspend is notified within two business days.

Activation and Eligibility

To activate Netspend overdraft protection, you must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms to the contract associated with signing up for overdraft protection. Additionally, as a Netspend customer, you must receive deposits of $200 or more every 30 days to qualify for overdraft protection.

If you overdraw your account balance by more than $10, Netspend sends a notification about the overdraft. You have 24 hours to replenish the account to restore its balance to more than $10. If you fail to act on the notice, Netspend charges an overdraft protection service fee of $20.

Overdraft Protection Deactivation

If you fail to receive deposits of at least $200 every 30 days, Netspend cancels the overdraft protection, meaning you must go through the application steps again. However, if a card account has a negative balance for more than 30 days three times or for more than 60 days at one time, the overdraft protection will be permanently canceled.

Netspend customers should be careful not to delete their email addresses or withdraw consent to receive electronic disclosures because their Netspend overdraft protection will be automatically deactivated.

How Netspend Cards Work

Founded in 1999, Netspend offers reloadable prepaid cards, both Mastercard and Visa. The company does not do a credit check on applicants, but it does require them to furnish proof of identity.

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 a lower 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 coverage limit and the cards can be used at any location that accepts MasterCard and Visa debit cards for transactions, including ATMs.

The Bottom Line

Netspend will let you overdraft your account, but you'll need to sign up for the overdraft service beforehand, and be prepared to either correct the overdraft within 24 hours or pay the $20 overdraft fee. The service is capped at five overdrafts per month, and you must maintain eligibility, including by receiving $200 in deposits every 30 days and agreeing to the service's terms and conditions.

Netspend does not guarantee that it will cover every overdraft, either, rather providing the service as a courtesy. Netspend users may find this overdraft service to be expensive, so it's worth checking out alternatives before you enroll.