Digital Bank Chime Offers Overdraft Protection To Its 5M Customers

Chime, a digital banking startup based in San Francisco, said it has reached a threshold of five million customers and plans to introduce a new overdraft initiative to help them, according to a report.

The startup is an FDIC-insured mobile bank that has no physical branches and pledges to offer customers fewer fees.

The banking startup recently had a Series D funding round that raised $200 million. At the time, it said it had about three million customers, which means the remainder were added within the last few months.

Digital banking is becoming more and more popular around the world, especially in Europe, where banks like N26 and Monzo are very popular. Chime is calling itself the world’s fastest-growing digital banking provider, seemingly in an attempt to position itself in the same league as those better-known banks.

The overdraft initiative, called SpotMe, is geared toward customers who live paycheck to paycheck and deposit all of their earnings into their Chime accounts. Consumers who are direct-depositing at least $500 per month are eligible for the service.

“A few small purchases each month can wind up costing Americans hundreds of dollars per year in overdraft fees when using traditional overdraft protection,” the bank said in a blog post.

Once users are signed up, they won’t be penalized if they keep spending with a debit card after a balance drops to zero, with an overdraft limit of up to one hundred dollars. When the next paycheck comes in, it will automatically pay for the negative amount without any overdraft fees. People who use Chime can also leave tips for other users who need a hand.

“Before releasing a full version to the public, we rolled out a private beta version and tested SpotMe with a sample of hundreds of thousands of Chime members,” the bank said. “During our beta, we saved our members over $200 million in overdraft fees, giving them the freedom to pay for everyday necessities including groceries, food and transportation.”