The majority of us have been in that situation. You go over budget on a few items one month, and your checking account is overdrawn before you realize it. If you've overdrawn your bank account, you may take steps to correct the situation and avoid it happening again. You'll need to move immediately because you'll likely end up with more overdrafts, bounced checks, and fines if you don't.
Overdraft Fees: What You Should Know
Most banks charge you a fee for each overdraft on your account, and some even charge you extra costs for each day your account is overdrawn. You may also be responsible for returned check costs if you've bounced checks. Fees and policies differ between banking institutions, so contact yours to learn more about the fees you'll be charged. In addition to the negative balance on your account, you'll be responsible for any fees. In the United States, the average overdraft cost is roughly $30.Stop Using the Account
Because fees can quickly build-up, you should attempt to avoid using your checking account until everything is in order. If your account is overdrawn, you should cut off all non-essential spending until you can get it back into the black. This may also imply canceling all automated payments and subscriptions that are regularly deducted from your account, as each one may entail a cost. In order to bring your balance to $0 again, your bank or credit union will typically utilize your subsequent deposits—including any direct deposits such as paychecks—to settle the total owed from overdrafts and fines. It's a good idea to get your account back to normal as soon as feasible. If you can't afford to meet the costs with your next paycheck while also covering your essential living expenditures, you might want to consider cashing your check rather than depositing it in your bank account. If you have a direct deposit, you should contact your company as soon as possible to change it.Balance Your Account
Manually balancing your checking account is the next step you should take. This will assist you in determining how much money you'll need to pull your account back into the black immediately. Include any returned checks or overdraft fines and any charges or cheques that haven't yet cleared your account. You have a few options for balancing your account. You may view what you've spent, the checks you've made, the direct deposits you've set up, and any outstanding payments by logging into your account online. You can also check your checkbook or account ledger, but this will only be useful if you've kept track of your spending. Every day, checking your account balance isn't enough to keep your account balanced. If you haven't been balancing your account regularly, you should start now, especially if you're having problems with an overdrawn account. Begin by keeping track of your daily transactions and crossing them off as they clear your account.Bring your account balance back up to par as soon as possible.
It's critical to get your account balance back into the black as quickly as possible. If it's overdrawn for more than a few days, your bank may begin imposing extended overdraft fees on top of what you already owe, which can quickly add up. Financial institutions' policies differ; however, banks will cancel your account if it is overdrawn for an extended period of time in many circumstances. If you pay for your goods with cash, put some into your checking account each pay period to help close the gap. Consider selling stuff you no longer want or want to help narrow the gap. If possible, consider borrowing the money from a friend or family member to get your account back in the black as soon as possible and avoid additional overdraft costs.Talk with a Bank Representative
If you phone their customer service line, many banks may waive the first overdraft or returned check fee, especially if it's the first fee incurred by a new account or any account's first fee in a new calendar year. This can help you pay off your debt. Remember, though, that banks are not required to refund any fees—and you'll usually get better results if you're polite and ask nicely. If you owe too much or don't think you'll be able to settle your overdrawn account, talk to your bank and come up with a plan to resolve the problem without being reported to ChexSystems. The bank may either set up a payment plan for you to repay the money or terminate your account. In any case, you will be responsible for repaying the money you owe. Direct, respectful engagement with your bank is the best method to address the issue and find a solution.Take Steps to Avoid Future Overdrafts
After you've cleaned everything out, you can continue to use the same account, but you must take the following precautions to avoid future overdrafts:Track Your Spending
Maintain a running ledger and double-check it before making any new purchases. Each day, checking your account to see what has cleared and what has not is quite simple, especially with mobile banking. Tracking everything yourself also makes it easier to detect faults made by the bank or costs that you may have overlooked. Remember that you can't just peek at your amount at an ATM or online and assume it's correct because none of your checks or debit card transactions have cleared yet. It is critical to have a running balance in your bank account.Sign Up for Low Balance Alerts
Most banks allow you to sign up for low-balance notifications, which notify you when your account falls below a specific threshold. You shouldn't need this if you're tracking your expenditures, but it's an excellent backup.Don't Opt-In for Overdraft
With a few exceptions, banks can only allow you to overdraw your account if you enroll in their overdraft program. You can opt out at any time, and an excellent moment to do so is after you have overdrawn your account. However, if you do not have the necessary cash, your transaction will be denied.Link to Another Account
Many banks will let you link your checking account to a savings or credit account, covering transactions if you don't have enough money. Some banks may charge a nominal transfer fee for this, but it is usually less than an overdraft cost.Frequently Asked Questions (FAQs)
Is an overdraft fee imposed immediately if my account is overdrawn?
While banks can and will charge you an overdraft fee, some will offer you until the end of the business day to deposit more money into the account to put it back into the positive and avoid the overdraft cost. Customers at Chase, for example, have until 8:00 p.m. PST to deposit cash into an ATM or at a branch to avoid the cost.Will the bank continue to charge me fees if I do not use my account when it is overdrawn?
While this was once a common practice among banks, most central banks have stopped charging overdraft fees on overdrawn accounts. Banks that have stopped doing so include Bank of America and Wells Fargo.Is it possible to close my account if it is overdrawn?
Most banks will not close your overdrawn account and keep it open until you bring it back into the black. If you desire, you can then close the account.