Even the most financially savvy people can find themselves overdrawn from time to time. Overdraft fees can soon add up so it’s a good idea to bring your account back into a positive balance as quickly as you can. But with that said, how long can your checking account be overdrawn before more severe consequences occur?
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Overdraft products vary from bank to bank. On the whole, your bank won’t take too kindly to you relying on overdrawing and having a negative balance for too long, as it shows that you’re 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 (each bank’s policy will vary), you may be charged an extended overdraft fee even if you don’t 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.
If you find that your entire paycheck is being swallowed up by your overdraft and you’re struggling to bring your checking account back into a positive balance, the first step is to speak to your bank to tell them about the problems you’re experiencing.
They may be able to help you by arranging an affordable repayment plan. However, if you still can’t pay off your overdraft, your bank may decide to close your account and then report you to ChexSystems. If this happens, you could have problems opening a checking account elsewhere.
It can be challenging to pay off your overdraft if you don’t have any spare cash lying around. However, it’s not impossible. If your bank will give you a little breathing space to raise some funds, the best thing to do is try to earn some extra money to clear your negative balance. Here are some suggestions to get you started:
- Sell old items that you no longer need on eBay.
- Host a yard sale.
- Do small jobs for cash. Check out Fiverr where you can make $5 plus for quick gigs or Upwork, a freelancing platform where you can carry out a range of jobs online.
- See if you can pick up extra hours at your existing job.
- Cash in your loose change collection – coins can add up, and you may have more stashed away than you think.
Most banks offer overdraft protection plans alongside their checking accounts. There are some plans where you can link another account (for example a savings account) to your checking account. If a transaction takes you overdrawn, funds will be automatically transferred from your linked account into your checking account to cover the overdraft. Flat transfer fees usually apply – check with your bank to find out how much.
Watch out for forms of overdraft protection that aren’t linkable to another of your accounts. These tend to charge you a fee for every overdrawn item, usually in the region of $35 each time and you can be charged more than once in a day.
One way to avoid becoming overdrawn is to opt out of overdraft protection altogether. In this case, your debit card payment will be declined or your check will bounce, and you won’t be able to go overdrawn. However, you’ll likely be charged a Non-Sufficient Funds (NSF) fee by your bank, and you may receive charges from the company that had the transaction returned.
The ideal way to avoid a negative balance is to monitor and control your finances effectively. Doing so will enable you to stay on top of your income and expenditure each month and you’ll find keeping up with automated payments much easier.
This way, you’ll be able to see beforehand if you’re likely to go overdrawn. You’ll then have time to take action, such as cutting back on your spending in other areas for a while.
Disclaimer: the facts and figures presented above are correct at the time of publishing.