If you’ve overdrawn your bank account, there are some steps you can take to rectify the situation and prevent it from happening in the future. You’ll need to act quickly, because if you don’t resolve it right away, you could find yourself in a downward spiral of more overdrafts, bounced checks, and fees.
Understand Your Bank’s Overdraft Fees
Most banks charge you a fee for each overdraft on your account, and some charge additional fees for each day your account is overdrafted. If you’ve bounced checks, then you may also have to pay returned check fees as well. Fees and policies vary across financial institutions, so be sure to contact yours to get an understanding of the fees they’re charging you. You’ll be responsible for paying any fees in addition to the negative balance on your account.
Stop Using the Account
If your account is overdrawn, you should discontinue all nonessential spending until it’s back in the black. Because fees can add up quickly, you should try to stop using your checking account until you have sorted everything out. This may also mean stopping all automatic payments and subscriptions that are normally taken from your account, because each one that comes out may incur another fee. Your bank or credit union will usually use your next deposits—including any direct deposits such as paychecks—to cover the balance owed from overdrafts and fees in order to bring your balance to $0 again. It’s best to bring your account back to even as soon as possible. But if you can’t afford to cover the fees using your next paycheck and also pay for your basic living expenses, then you might want to consider using a check-cashing service instead of depositing it in your bank account. If you have direct deposit, you may consider changing it ASAP with your employer.
Balance Your Account
The next step you should take is to manually balance your checking account. This will help you figure out how much money you’ll need to bring your account back into the positive immediately. Don’t forget to include any returned check or overdraft fees, or charges or checks that haven’t hit your account yet. You can balance your account in a couple of ways. You can log into your account online to see what you’ve spent, the checks you’ve written, the direct deposits you’ve set up, and any outstanding payments you have. You can also look at your checkbook or account ledger—but that will only be helpful if you have kept a running tab of what you’ve spent. Balancing your account is more than just checking your balance each day. If you’re not regularly balancing your account, you should start doing so now, especially if you are having issues with an overdrawn account. Start by recording the transactions you make each day and marking off when they clear your account.
Bring Your Account Balance Positive As Soon As Possible
It’s important to bring your account balance back into the positive as soon as possible. If it’s overdrawn by more than a few days, then your bank may start charging extended overdraft fees on top of what you already owe—and this can quickly snowball. Policies vary among financial institutions, but in many cases, banks will close your account if it’s overdrawn for an extended period of time. If you’re using cash to pay for your purchases, deposit some into your checking account each pay period to help correct the deficit. Consider selling items you do not need or want to help close the gap, as well. If possible, you may consider borrowing the money from a friend or family member to bring your account into the positive as quickly as possible and avoid more overdraft fees.
Talk with a Bank Representative
Many banks will waive the first overdraft or returned check fee if you call their customer service line, especially if it’s the first fee incurred by a new account or the first fee incurred by any account in a new calendar year. This can help reduce the balance you owe. However, keep in mind that banks are not obligated to refund any fees—and you’ll typically get better results if you are polite and ask nicely. If you simply owe too much, or you don’t think you’ll be able to fix your overdrawn account, you should speak with your bank and set up a plan that will allow you to fix the problem without being reported to ChexSystems. The bank may set up a payment plan for you to pay the amount back or they may close your account. Either way, you’ll still be responsible for paying back the money you owe.
Take Steps to Avoid Future Overdrafts
Once you’ve cleared everything up, you can continue to use the same account, but it’s important to take steps to ensure that you don’t overdraw your account in the future:
Track Your Spending
Keep a running ledger, and be sure to check it before making any new purchases. It’s fairly easy to check your account each day to see what has cleared and what has not, especially with mobile banking. Tracking everything yourself also makes it easier to catch mistakes that the bank may have made or charges that you may have forgotten. Remember, you cannot simply look at your balance at the ATM or online and assume that it is the correct balance, because not all of your checks or debit card transactions may have cleared yet. This is why it’s important to keep a running balance of your bank account.
Sign Up for Low Balance Alerts
You can sign up for low-balance alerts through most banks to alert you when your account hits a certain amount. If you’re tracking you’re spending, you shouldn’t need this, but it’s a good backup.
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.
Link to Another Account
Many banks allow you to link your checking account to a savings or credit account that will cover transactions if you don’t have enough funds. Some banks may charge small transfer fees for this, but they’re generally lower than overdraft fees.