Photo by Adam Satria on Unsplash
Did you mail a cheque only to be notified that it bounced? Or perhaps you tried to buy something with
your debit card, and when you checked your online statement later, you were
shocked to find a negative balance. You just spent more money than you have, so
what do you do to fix it?
First, don’t panic.
It’s not a fun situation to be in, but it happens. Follow these tips to get
back in the black as soon as possible:
The Consequences of Overdrawing
Your Account
The consequences of
an overdrawn account depend on your bank’s specific policies. If you have
opted-in to overdraft protection, then the transaction you were trying to make will
still go through because your bank will cover the amount. In this instance,
your bank will charge you an overdraft
fee, which will likely be around $33. If you don’t have overdraft protection, though,
then you may be charged an NSF fee (nonsufficient funds fee) that is a similar
amount, but your card will decline, or your cheque will bounce.
Overdrawing your
account now and then isn’t the end of the world if you can pay the fee, but
relying on overdraft protection too often could result in your bank terminating
your account. It may also report you to a debit bureau that may make it more
challenging to open a new chequing account in the future.
Plus, it may not be
your bank who takes action against you if you’re in the red for too long;
services you pay for may cancel on you if they don’t receive payment in
time.
What to Do if You Overdraw Your
Account
Those are a few
examples of consequences, but what should your next steps be?
Don’t Spend Anymore
This should be
obvious, but it’s worth repeating: don’t spend any more money with the
overdrawn account. It’s understandable if you have essential expenses coming
up, but don’t use the account at all, if possible. Check on your upcoming
subscriptions or auto-payments that could put your further in the red. Only
once you have replenished your accounts’ funds should you resume spending.
Keep in mind that if
you don’t have a backup source of money, then your bank will automatically use
your next deposit to cover your negative balance. Your negative balance likely
includes the fee, so factor in this change for your monthly budget.
Replenish Your Funds
You probably guessed
this one, but replenish your account as soon as possible. Don’t let it remain
negative for too long, or your bank may charge you extended overdraft fees, which can accumulate quickly. Use your
savings or another backup account to bring your overdrawn account back up to
zero, preferably higher.
If you don’t have any
other sources of money to make your checking account positive again, then
consider borrowing from someone you trust, picking up a side-gig, or selling
items you don’t need.
Another option is to
use Earnin, which allows you to access your income on time if
your bills are due before your paycheck arrives. Pay cycle delays may have been
the reason you overdrew your account in the first place, so next time, you can
use Earnin to take out up to $100 per day, $500 per pay period, and avoid paying overdraft
or NSF fees. Earnin then deducts the amount you used from your paycheck once
it’s deposited.
Check if You Were Charged
Overdraft or NSF Fees
You have to opt-in to
overdraft protection, but if you aren’t sure whether you have it or not, it’s
possible you signed up for it without realizing what it is. Though you’ll know
when making a debit card purchase immediately (the card will decline if you
don’t), double-check with your bank if you realize you are about to overdraw
your account with a written check. In this situation, you have time to contact
your bank and the recipient and void it before it’s deposited. Likewise, look
for an NSF fee on your account so you can pay it before you plan next month’s
budget.
Contact Your Bank
If you attempt to
make a transaction that overdraws your account, contact your bank’s customer
service center and find out if they can remove any fees that will put you in further debt. It never hurts to
ask, and the worst thing they can say is no. Bank representatives may be even more
inclined to help you out if you have been an outstanding customer in the past
or if you explain your situation to them.
Enable Low Balance Alerts
You can connect
various apps to your bank account that will notify you when funds are running low (including the previously
mentioned Earnin). This way, you’ll know how much money you have in your
account before you attempt to make a purchase with non-sufficient funds, and
you can avoid an NSF or overdraft fee altogether.
Overdrafting your
bank account can be alarming, but here are strategies you can use to get back
in the black quickly and (hopefully) avoid paying additional fees.
This article originally appeared on Earnin.
Please note, the
material collected in this blog is for informational purposes only and is not
intended to be relied upon as or construed as advice regarding any specific
circumstances. Nor is it an endorsement of any organization or Services.
