What Happens When Your Bank Account Is Overdrawn?
If you miscalculate the amount of money you have in your bank account, an overdraft can set off a chain reaction of problems including negative balances, nonpayment of items, fees, and even collections and charge-offs.
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Negative Balance
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When you overdraw your bank account, your balance becomes negative. This means that you essentially owe the bank money. For example, if you have $20 in your account and write a check for $30, your account balance will be negative $10 when the check is paid. You owe $10 to the bank.
Nonpayment of Items
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Each bank has rules on which items they will and will not pay. This means that the bank may choose to return the check you wrote to the person to whom you wrote it.
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Items That Can Cause Overdrafts
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Any type of withdrawal transaction could cause an overdraft. These transactions include withdrawals, checks, automatic payments, online payments, and debit card purchases.
Fees
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Your bank will probably charge you an overdraft fee for each item that causes a negative balance. In addition, the bank may charge you a daily fee as long as your account is "in the negative." If you happen to overdraw your account, contact your bank immediately to determine what fees they may charge.
Collection and Charge-Off
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If your account stays in a negative balance for a long time, the bank may "charge-off" your account, meaning that they will turn over the balance you owe to a collection agency.
Fixing an Overdrawn Account
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You should discuss the cause of the overdraft with your bank, but the best way to fix an overdraft is to make a deposit immediately. Keep in mind that you'll need to cover the fees and any other items that may still be outstanding.
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- Photo Credit Image by Flickr.com, courtesy of Carly Watson
