When a banking customer writes a check for more money than what’s in his account, the account is said to be “overdrawn.” Overdrawing a checking account is a very expensive mistake, as many of us have probably learned over the years.
When a check bounces, the bank not only dings you with a hefty overdraft fee, but will then return the check back to the payee who will also demand a processing fee of his own. With banks now charging overdraft fees anywhere from $35 to $49 per bounced check, it only takes a few bounced checks to bring a checking account hundreds dollars in the negative.
So what happens when your account shows a negative balance? Most of us can probably cover those overdraft fees with money that’s already in our savings accounts. Others may have to wait until payday. However when the money just isn’t there to pay off the overdraft at all, an account holder may wonder if closing the account will stop the barrage of overdraft fees and penalties that are driving the account deeper into the hole.
Unfortunately, canceling an overdrawn account isn’t one of your options. When a checking account is overdrawn, the bank will refuse to close out the account and will instead ask for some kind of payment arrangement to bring the account back into the black. Thirty days seems to be standard, with some banks willing to give their customers you up to 45 days to pay off the overdraft fees and interest.
If the account is still in the negative after the 30-45 day repayment period ends, the bank may close your checking account and turn it over to a collections agency for further action. They may also report you to the Chex Systems network. Chex System is a national network of banks who share information with each other, as a way to identify risky account holders. Once you’ve been reported to the Chex System network, it may be very difficult to open a checking account elsewhere which is why paying off your overdraft in a timely manner should be a priority.
What you can do when your checking account is in the red are these two simple things. The first, is to call the bank and ask them to “freeze” the account from processing any more automatic withdrawals or automatic debit activity. If you are certain that all your checks are have cleared, the bank should be willing to freeze the account temporarily to stop these automatic withdrawals from driving your account deeper into debt. The second step is to speak with someone at your bank, work out an arrangement for some kind of weekly payment plan, and stay with it. It’s been my experience that as long as you stick to your end of the bargain and make every effort to pay down the overdraft charges, the bank will keep your account open until it’s back in the black.
