What Happens If I Overdraw My Checking Account?

Features

Some banks do not allow account holders to overdraw their account. For example, in August 2010, Bank of America initiated a policy that prevents account holders from being able to withdraw more money from their account than was currently in it. If a customer tries to charge his debit card for an amount greater than his current balance, the transaction will be denied. Other banks, however, issue fees for overdrafts.

Prior to August 2010, Bank of America issued a fee of $35 to its customer each time his account was overdrawn. If a customer overdrew his account multiple times, a fee would be assessed for each occurrence. For example, if a customer overdrew his account and it fell below $0 and he overdrew again that same day for another transaction, sending the negative balance lower, he would be assessed a fee of $70.

Depending on the policy of the bank, additional fees may apply, depending on the how much is overdrawn and for how long. For example, at Northshore Bank, fees are assessed based not on individual transactions, but on the amount overdrawn. In addition, Bank of America previously chose to assess additional fees if the account remains overdrawn for more than five business days.

Depending on the policies of the bank or credit union, the customer may have various options to prevent his account from being overdrawn. For example, many banks allow customers to make overdrafts impossible by having their debit card transaction denied if it would put their balance into negative space. In addition, some banks offer overdraft protection, in which money from another account is immediately added to the checking account if the account becomes overdrawn.

Bouncing a check is not same thing as overdrawing an account. For many banks, if an account holder issues a check to another party and the other party attempts to cash it at a time that would leave the checking account in negative territory, the check will be refused or bounced. In other cases, the bank will accept the check and treat the transaction like an overdraft.