Use These Tips To Avoid Overdrafts
Once youve fixed an overdrawn account, you can take a few critical steps to prevent overdrawing again.
Track your expenses
You dont have to physically balance a checkbook, but you should have some way of tracking expenses, says Brashears-Lusk. Balancing your checkbook and budgeting dont necessarily mean you have to stick to a spreadsheet several budgeting apps could work.
Use low balance alerts
Automated alerts can help you avoid overdrawing an account. You can specify a threshold for a low balance and set up an alert to notify you when the account reaches that balance.
Reconsider overdraft protection
Overdraft protection transfers are an optional service that lets you move money from a linked account to your checking account to cover transactions that would overdraw the account. These transfers are typically cheaper than an overdraft charge and free at some banks, but if theyre not free, theyre a vital charge to consider.
What Will Happen If I Dont Have Enough Money In My Account To Cover An Atm Or Everyday Debit Card Transaction And I Dont Have Debit Card Overdraft Service
ATM and everyday debit card transactions will be declined at the time of the transaction. There are no fees for ATM and everyday debit card transactions that are declined. If a checking account is not enrolled in Debit Card Overdraft Service and an ATM or everyday debit card transaction creates a negative balance during posting, an overdraft fee will not be assessed.
Please be aware that checks or recurring bill payments you have pre-authorized using your debit card or checking account may be returned unpaid or approved into overdraft whether or not you are enrolled in Debit Card Overdraft Service and an overdraft or returned item fee would be assessed.
What Happens If My Bank Account Is Negative For Too Long
Overdraft products vary from bank to bank. On the whole, your bank wont take too kindly to you relying on overdrawing and having a negative balance for too long, as it shows that youre struggling to manage your finances.
Banks typically attempt to notify you when your checking account goes overdrawn so that you can deal with your lack of funds sooner rather than later.
If your balance remains negative for between 3-31 consecutive business days , you may be charged an extended overdraft fee even if you dont have any more payments scheduled to be taken out. These fees can send your balance even further into the red.
In most cases, banks will close a checking account after 60 days of being overdrawn. Ask your bank about the terms of their overdraft policy to find out the exact length of time your account can remain overdrawn.
If your checking account gets closed because of overdraft issues, you may end up being reported to ChexSystems, a consumer reporting agency. Many banks use ChexSystems to determine whether they should approve your application for a bank account.
Read Also: Does Chase Bank Use Zelle
Can You Withdraw Money From Atm With Insufficient Funds
Lack Of Funds Once you have opted in, your bank can choose to approve ATM withdrawals even if you have exhausted your line of credit or withdrawn all of the cash from your savings. When this happens, an ATM withdrawal could cause your account to go into the negative and your bank can assess an overdraft fee.
Can You Go To Jail For Overdrawn Bank Account
You can go to jail for a overdrawn bank account if the check is written on a closed account and/or if you fail to make good a bad check within 10 days of receiving overdraft notice. No, it is not against any law, just causes an overdraft charge on your account and another charge if your balance goes negative.
Read Also: Routing Number For Ibc
Axos Bank Rewards Checking
With Axos Bank Rewards Checking, an online bank, customers won’t pay monthly fees or overdraft fees. There are no minimum balance requirements, but you must deposit $50 to open an account. There are also tiered APY rates where account holders can earn up to 1.00% APY, if they meet specific requirements: Direct deposit a minimum of $1,500 per month into the account and use the debit card for at least 10 monthly transactions.
Take Care With Your Spending
Maintain a running ledger and double-check it before making any new purchases. Its relatively simple to check your account each day to see what has cleared and what hasnt, especially now that mobile banking is available. Its also simpler to identify mistakes made by the bank or charges you may have forgotten if you keep track of everything yourself.
Remember that not all of your checks or debit card transactions have cleared yet, so you cant just glance at your balance at the ATM or online and assume its right. This is why its crucial to maintain track of your bank accounts balance.
Don’t Miss: Ibc Bank Zelle
Know The Timing And Ordering Of Transactions
One of the most common ways overdrafts happen is when a customer draws on money that has not yet arrived in the account. The problem here has two parts: processing order and deposit availability. Banks follow a specific order when they apply deposits and withdrawals to your account balance. They also have rules about how quickly you can access money, depending on the method you use to transfer it into your account.
Generally speaking, you can expect cash deposits, direct deposits and incoming wires to process before withdrawals in the same day, so as long as you are depositing enough money to cover the day’s expenses, you should be safe from an overdraft situation. However, you should know that checks require at least one full business day to show up in your balance. Depending on many different factors, including the size of the check, the point of origin and your account history, the bank may take as long as a week to make the full amount available.
What To Do When Your Bank Has Closed Your Account
As soon as you receive notice that your bank has closed your account, you need to take immediate action in order to be able to continue to pay your bills and manage your money. If you do not, your paycheck may go to the bank, but you will not be able to access the funds. The bank may keep them to help cover your negative balance, since you still owe them that money.
Recommended Reading: Does Ibc Bank Accept Zelle
Can The Bank Charge An Overdraft Fee While There Is A Deposit Pending
Yes. Many transactions are processed overnight. These transactions may not be reflected in an available balance. Refer to your deposit account agreement for your bank’s overdraft and transaction processing policies.
It is important to keep a current and accurate check/transaction register and balance it to your monthly statement. A bank’s online, telephone, or ATM balances are for information purposes onlythey do not replace your check/transaction register. You should also keep in mind that banks do not have to make funds available for withdrawal as soon as they are deposited.
Banks generally post deposits before withdrawals. However, the law does not require this. In addition, banks may establish a cut-off time for deposits made at a branch or through an automated teller machine . Deposits made after that time may be treated as having been made on the following business day.
For example, a deposit made after the Friday afternoon cut-off time could be treated as if it were made on the following Monday. So, any items with next-day availability would then be available the next day .
Last Reviewed: April 2021
Account Closure For Long
Your bank can and will close your account if it’s negative for too long. It can also close your account if you repeatedly go negative. The only way to know what your bank will do, and when it will do, it is to ask someone at the bank or to read the disclosure that you got when you opened the account.
Once your account gets closed, you’ll still owe the money to your bank, too. Having your account closed by your bank could be the least of your problems, though. Banks have their own set of reporting bureaus, just like the credit bureaus. Once your bank reports you to their bureau, it will likely be difficult for you to open a bank account anywhere else for years, especially if you haven’t paid off what you owe.
Don’t Miss: Which Banks Sell Silver Bars
Can Your Bank Account Go Negative
A transaction that brings your account into a negative balance is called an overdraft. A transaction that would bring your account negative but the bank returns unpaid is called non-sufficient funds or insufficient funds transaction. Banks may charge a fee for either an overdraft or a returned unpaid transaction.
How Long Can Your Bank Account Be Negative
The amount of time it takes to close a negative bank account will vary from one bank to another, depending on their policy. Other factors like the size of the negative balance and the customers baking history also come into play. However, most banks will take anywhere between 30 days to 4 months to close negative accounts.
Read Also: Does Ibc Have Zelle
When You Go Negative
When your account gets to a negative balance, your bank will probably charge you an overdraft fee that makes your account even more negative. Sometimes, it will charge you multiple overdraft fees for each transaction that happens when you have no money. Once you overdraw your account, your bank expects you to immediately put money in to bring the balance back to a positive balance.
Deposit Money Right Away
If you arent able to transfer money from one account to another right away, figure out a way to deposit money into the overdrawn account. Perhaps you can scrape together enough money from the coins you keep in a jar at home or borrow money from a friend. If you realize soon enough that an overdraft is going to happen, the money you deposit may allow you to avoid overdraft or NSF fees.
Read Also: Quick Zelle Chase
Best Banks For Avoiding And Limiting Overdraft Fees
Customers can avoid overdraft fees by choosing not to enroll in an overdraft program. Those who do opt in can lower costs by choosing a bank that allows free transfers from linked accounts. Another way to reduce fees is to choose an institution that limits the number of overdraft fees charged per day.
Why Is My Bank Account Balance Negative
Your bank account may end up with a negative balance for various reasons. For instance, you may have a negative balance when you deposit a check and make the payment instantly before the money reflects in your account. Second, you may forget the amount of money you have in your account, and end up making payments for commodities worth more than your actual balance.
In an instance where you own more than one account in the same bank, you might get confused about the account to use to make your payment. In such a scenario, your bank account may end up with negative funds even though your other account has enough money.
Note: there are other ways you may end up with a negative bank account other than writing a check. Some of these include
- Use of debit card
- Direct withdrawal from the bank
- Use of electronic modes of payments like scheduled payments
- ATM transactions
Also Check: Td Bank Penalties And Withdrawal Limits
Miscalculations And Mistakes Can Happen
You could forget about a payment you previously scheduled or a purchase you made earlier in the month. You might incorrectly assume that a withdrawal wont be processed for a few days and that a deposit will clear in the meantime.
And you can accidentally withdraw too much if you make a mistake when writing a check.
If you have more than one account at the same bank, confusion about which account youre using can also lead to an overdraft. If you overdraw one account, your balance on that account will go negative even if you have more than enough money in another account to cover the payment, unless you arranged with the bank beforehand to transfer money between accounts in situations like this.
Don’t Opt In For Overdraft
With some exceptions, banks can only allow you to overdraw your account if you opt into their overdraft program. You can decide to opt out at any time, and a great time for that would be after overdrawing your account. However, this means that if you don’t have the funds, then transactions will be declined.
Recommended Reading: Chase Bank Motorcycle Loans
How To Avoid Overdrafts
One way to avoid going negative is to put some extra money in a savings account linked to your checking account. If you have an overdraft, your bank will pull the money from your savings account to cover the transaction. There may be a fee for this, so it’s best not to actually end up overdrafting, but it’s better than owing your bank money.
Another option is overdraft protection, which can be applied to ATM withdrawals and debit card transactions, such as store purchases, and also checks and ACH transactions. When a customer enrolls in such a program, the bank will approve the transaction even with insufficient funds in the customer’s checking account. There is usually a set fee for this, often around $35. Overdraft fees can quickly add up and sometimes a bank can reject a transaction when there are insufficient funds and still charge a fee. It’s not unusual for a bank to charge multiple overdraft fees in the same day.
Another way to avoid overdrafts is to pay careful attention to your account. Check your balance regularly many banks have smartphone apps or let you check your balance by text message and don’t spend more than you have. Reconciling your bank account may not be a lot of fun, but it’s better than paying overdraft fees or losing your checking account.
Make A Transfer To Cover The Charges
If you have cash in another account, transfer it to cover the deficit and avoid additional fees. That should be the first step you take, says Andrea Brashears-Lusk, a certified financial planner and president and founder of Wise Financial Counsel in Fort Washington, Md. For example, some banks charge a fee for having a negative balance for consecutive days, and that fee could be charged multiple times.
Also Check: Closest Pnc Atm To Me
Connect Your Checking Account To Another Account Or Credit Line
Many banks allow you to link another bank account or credit card to your checking account to minimize overdrafts. When your account hits a 0 balance, money is transferred from another bank account or charged to your credit card. Some banks provide clients with a line of credit that helps them avoid overdraft fees. You may have to pay transfer fees or interest, but itll be less expensive than paying individual overdraft fees.
How Does Overdraft Protection Work
Once you link your accounts, funds will be automatically transferred from the linked overdraft protection account as follows:
- If the negative available balance in your checking account is $5.01 or more, funds may be transferred in multiples of $50, and the overdraft protection transfer fee will be charged.
- If your negative available balance is $5.00 or less, the transfer amount will be $5.00, and the overdraft protection transfer fee will be waived.
- When the overdraft protection transfer is made from a linked deposit account , there is no fee.
If the account linked for overdraft protection doesnt have sufficient funds to cover the overdraft:
- The available balance in the linked account will be transferred to reduce the overdrawn amount.
- If theres another account linked to your checking account, funds will be transferred from that account in multiples of $50 to cover the remaining negative available balance.
For example, lets say your checking account balance is $42 and the available balance in the linked credit account is $1,000. If you write a check for $125, this would overdraw your checking account by $83. We would transfer $100 from the primary account linked for overdraft protection, which includes enough to cover your negative balance and your overdraft protection transfer fee.
Don’t Miss: Editing Bank Statements