My Bank Account is Negative $1,000 — Fix it

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Dena Standley, BA

Dena Standley is a seasoned paralegal with more than 20 years of experience in legal research and writing, having received a certification as a Legal Assistant/Paralegal from Southern Technical College.

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Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

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George Simons, JD/MBA

George Simons is the co-founder and CEO of SoloSuit. He has helped Americans protect over $1 billion from predatory debt lawsuits. George graduated from BYU Law school in 2020 with a JD/MBA. In his spare time, George likes to cook, because he likes to eat.

Summary: If your bank account is in the negative, you should avoid using an overdrawn account at all costs and focus on replenishing the balance. To fix a negative bank account, consider a checking account advance, closing your account, or contacting a bank representative to minimize fees and explore your options.

We've all been in that situation. You go over budget on a few items one month, and your checking account is overdrawn. Before you realize it, you are in the negative zone. A negative account has profound implications; your account may be temporarily suspended or closed, and ChexSystem may record a closure on your record, making it harder for you to open new bank accounts in the future.

In any case, you can make efforts to correct the issue and prevent it from happening again. It would be best if you acted immediately to avoid a downward spiral of overdrafts, bounced checks, and fines.

Here's everything you should know about how to fix a negative account below.

Do not use an overdrawn account

If your account has a negative balance, you should immediately stop using it. Because of the overdraft fee that your bank charges for each negative transaction, a negative account balance quickly snowballs into an enormous debt. Anyone who charges transactions from the account increases the debt because each transaction is double charged.

If your bank account has insufficient funds to afford a purchase, your debit card may be refused right away. However, your card may be accepted during the purchase, only charged later with fees that add to your debt. For example, if you went to a store and spent $3,000, but your account only had $2,000 in it when the retailer deposited the check in the bank, you would owe $1,000 on the check.

The retailer's bank can either pay him the full amount or let the check "bounce" to your bank and mark it with non-sufficient funds (NSF). If the first scenario occurs, you are liable for the $1,000 overdraft.

Explore your checking account advance

Consider a checking account advance if your bank offers one where the bank will lend you the money you need to balance your account at a high-interest rate. To qualify for a checking account advance, you'll probably need to make regular deposits into your account.

If your paycheck is directly deposited into your account every two weeks, your bank may offer you a checking account advance (and your account history shows this). Remember that these advances might come with excessive interest rates and fees, so tread caution when considering this option.

Consider closing your checking account

If you cannot pay your negative account balance, ‌try to freeze or close the account because most banks charge a negative account balance fee on a negative account. If you cannot make a deposit, these costs will make it even more challenging to settle your obligation.

Call or visit your local branch to find out what your alternatives are. Depending on your bank, you may ‌quickly close or freeze your account to prevent continued costs.

Contact a bank representative

Call a bank's customer care line; they may waive the first overdraft or returned check cost, especially if it's the first fee for a new account or any account in a new calendar year. This can help you pay off your debt faster.

If you owe too much or don't think you'll be able to resolve your overdrawn account, talk to your bank about creating a plan that will allow you to resolve the issue without being reported to ChexSystems. The bank may offer you a payment plan or terminate your account if you do not repay the money. In any case, you'll have to repay the money you owe.

Minimize fees with the right options

Americans pay an average of $7 in monthly banking fees. It is essential to understand the options available and ways you can minimize or avoid fees. Banks are required under Federal law to disclose any fees they charge in connection with a deposit account. Ask your bank for the account opening disclosure and fee schedule. All deposit-related fees that your bank can charge are listed in the documents.

Standard fees might include:

Monthly maintenance: These fees may be lower or waived in certain situations, such as when you have a direct deposit or maintain a minimum balance. Ask if other fees can be waived with direct deposit.
Automated teller machine (ATM) withdrawal: To avoid charges, use only the ATMs in your bank's network or those that allow you to use your ATM or debit card for free.
Overdraft fees vary by bank, but they may cost around $35 per transaction. Some banks may also charge continuous overdraft fees or daily overdraft fees.
Minimum balance fees: Check with your bank to see if low balance warnings are available, so you don't accidentally fall below the minimum balance required for overdrafts.
Non-Sufficient Fund (NSF) fees: If you write a check for more money than your bank account and don't have any overdraft protection, the check will bounce, and you will be charged an NSF fee. Keeping track of your account balance will assist you in avoiding overdraft fees.

For more on account disclosures, visit the FDIC Consumer News January 2021 Issue.

How can I keep my account from going into an overdraft?

Different banks and credit unions handle overdrafts differently, so it's good to review those facts before opening a checking account. This will also assist you in setting up your account to suit your lifestyle and spending habits.

If you own a business, be on the lookout for thebest online business banking options to avoid overdrafts in your business acounts.

How can this be avoided in the future?

You may employ a few simple methods and practices to maintain your checking account in the black moving ahead. Here are a few examples:

Sign up for low-balance text or email alerts.
Regularly check your bank account and analyze your monthly statements.
Compare the dates on which automated payments are deducted to the dates you are paid. If required, change the automated withdrawal dates.
Examine your budget to ensure that no spending categories are constantly beyond your financial means.
Invest in an emergency fund.
Consider whether you need overdraft protection and coverage. If they do, make sure your backup account has enough.

You can fix a negative bank account

An overdraft is inconvenient, but it happens. Knowing that you have choices can help you better manage your finances and prevent yourself from falling into more debt. It may be beneficial to create a simple budget if you deal with overdrafts more frequently than you'd like. Having a clear picture of what's coming in—and what's going out—can sometimes be enough to keep you ahead of the financial game.

Respond to a debt lawsuit

If you are being sued by your bank for a debt, you should respond immediately. The first step to winning a debt collection lawsuit is to respond with a written Answer. Follow these three steps to answer your debt lawsuit and win in court:

Answer each claim listed in the Complaint: Instead of focusing on sharing your side of the story, your Answer should be simple and respond to the claims against you. You can admit, deny, or deny due to lack of knowledge. Most attorneys recommend that you deny as many claims as possible to strengthen your side of the case.
Assert your affirmative defenses: These are any legal reasons that the party suing you should not win the case. As we mentioned, the statute of limitations can be a great affirmative defense to raise in your Answer. There are several other defenses that can help you strengthen your case and even get it dismissed.
File the Answer in court, and send a copy to the party suing you: Make sure to file the Answer before the court deadline. This is anywhere from 14-35 days, depending on which state you live in. You should also serve the opposing attorney with a copy of the Answer. Send it via certified mail with a return receipt requested.

Learn more about these three steps here:

Why is my account overdrawn?

Your account is overdrawn because you spent more money than you have. This could happen for several reasons, including:

Overdraft fees: If your account is slightly overdrawn, banks may charge an overdraft fee, further increasing the negative balance.
Pending transactions: Sometimes, transactions that haven't been fully processed can result in an overdraft. For instance, a merchant might hold a certain amount on your debit card, affecting your available balance.
Automatic payments: Regularly scheduled payments, like utility bills or subscriptions, can cause an overdraft if they occur when your account balance is low.
Bank errors: Though rare, mistakes by the bank can also lead to an overdraft. It's important to regularly review your account statements for any errors.
Uncleared deposits: If you’ve recently deposited a check, there may be a delay in funds availability, leading to an overdraft if you spend against this amount before it clears.
Multiple transactions in a short time: Multiple transactions occurring in a short period can sometimes overlap before balances are updated, potentially leading to an overdraft.

To resolve this issue, review your recent account activity to identify the cause of the overdraft. If it's unclear or seems to be an error, contact your bank for clarification and assistance. Regular account monitoring and setting up alerts for low balances can help prevent future overdrafts.

How long can your bank account be overdrawn before they close it?

The Federal Deposit Insurance Corporation and The Code of Federal Regulations have incorporated a guideline that suggests charging off an overdrawn bank account in 60 days if there has been no deposit activity, while for federal credit unions, the suggested timeline is 45 days.

Once your account has been charged off, it may be passed on to a collection agency who will contact you to pay off the balance, plus fee, interest, and court costs if the case escalates to legal action.

Resolve a debt lawsuit after a charge-off.

How long can a bank sue you for an overdrawn account?

Each state has a unique statute of limitations that governs how long a bank can sue you for an overdrawn account, and you can check you state’s statute with this calculator:

Statute of Limitations Calculator

Select your state.

Choose the debt type.

Select the last day you made a payment.

This calculator is for educational purposes only.

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