We’ve all been there – asking our banker, “ Can you overdraft a negative account ?” The answer is yes but it’s more tricky than you may think. Any time you spend (or trying to spend) more money than you have, it’s going to cost you in either fees or penalties. You could take steps to protect your bank account from overdrafts. But either way, playing with overdrafts will cost you money you weren’t expecting to spend.
Overdraft Fees and Penalties
Let’s take a step back: overdrafts are only possible if you agree to them. Overdraft protection is basically an agreement you enter with your bank in which they guarantee payment on your spending up to a certain amount, usually a few hundreds bucks. For this overdraft service, you pay a fee per transaction – usually around $35.
Without overdraft protection, you will have insufficient funds penalties if you write a check and it bounces. Your payment will be rejected and you’ll have to pay penalties – usually about $35 as well – to your bank.
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Can I use my debit card with insufficient funds
Roughly 80% of all purchases made by individuals are now done with a debit card. It is estimated that people spend 12% more than they normally would because a debit card makes it so easy to spend money. But, what happens if you overdraft a debit card?
If you have opt-in for your bank’s overdraft protection service, it will automatically cover your purchase. You may not even know that you have gone into overdraft until you see your bank statement. Like mentioned, you will be charged about $35 for each purchase (from a positive balance to a negative balance and/or from a negative balance to a deeper negative balance).
Big problems arise with chronic overdrafts. If you operate on a tight budget, that $35 may be a budget buster that will create a snowball effect in which the overdraft fees put you further and further “into the hole” and you are in serious financial trouble. Some people end up paying hundreds of dollars of overdraft fees every month.
To avoid this terrible situation, you should consider using services such as the RainyDay app, which lets you borrow up to $2,500 in a quick and straightforward process. This is the best solution if you actually plan on overdrafting in the near future or you know you’re a frequent overdrafter.
Can you withdraw from a negative account
You certainly can withdraw money and/ or overdraft a debit card that has no money behind it. That is the whole reason for overdrafts! If you have overdraft protection from your bank, and zero balance in your account, you can still use the debit card. Just know that you will be charged that casual $35 overdraft fee for each withdrawal or purchase! So, that $1 soft drink at drive-through happy hour really cost you $36. The $10-worth of gas is now $45. If you have $200 overdraft protection, you owe the bank $81 rather than $11. This money will come out of your next deposit, and you have no choice in the matter.
The other option is to forego overdraft protection and allow the bank to issue insufficient funds notices. The bank will reject bank draft payments if you don’t have enough money in the bank. The entity trying to draft your account will bill you for a penalty and, if this is a common occurrence, will report you to the credit monitoring services.
If you try to make a purchase with your debit card, it will be rejected at the point of sale, or POS. At this point, you will have to give the merchandise back. If you are at a restaurant, you may end up washing dishes. Or talking to the police.
Your debit card will be rejected at ATMs, gas pumps, and at online POS. There is no penalty for this, since no exchange of merchandise or services has occurred.
For the chronic over-spender, this can be even more of a risk than insufficient funds. You don’t want to find yourself without food at the end of the month. But, if you usually take good care of your account and just occasionally run out of money, overdraft protection can be a great convenience. Otherwise, if you need cash now, there are lenders that will be happy to lend you money.
How long can your checking account be overdrawn
This will really depend on your bank and you, as a client. Banks like when you overdraft for short periods of time (because fees are really expensive) and you usually repay them back pretty quickly. Banks usually will let you have an overdrawn bank account for 30 to 60 days. You should know that your bank might charge you penalties only after a few days of being negative.