What happens when your bank account is overdrawn?


Quick Answer

According to BALANCE, a financial fitness program, when a charge hits your bank account and there are insufficient funds to cover it, either your bank may refuse the charge or allow your account to go into a negative balance. If the bank allows an overdraft, it typically applies a charge for each item that overdraws the account, and these fees can stack up.

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What happens when your bank account is overdrawn?
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Full Answer

Many banks offer the ability to overdraw your account as long as you are a customer in good standing. The amount you may overdraw depends on the institution, as do the fees involved. According to Forbes, if your bank receives multiple overdrawn charges on a single day, it may order them from largest to smallest in an attempt to pay your "most important" bills before hitting the overdraft limit.

To avoid overdraft fees, apply for an overdraft protection account, either a line of credit or a savings account that will be used to cover items that would otherwise overdraw your account, notes U.S. Bank. Your bank may also allow you to opt out of overdrafts entirely and will simply refuse any item that would otherwise bring your account negative. If you leave an account overdrawn for a long period of time, you may incur extra fees or collection actions to recover the money.

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