How To Recover From Being Overdrawn

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Most of us have been there. You go over budget on a few things one month, and before you know it, you've overdrawn your checking account.

If you have an overdraft on your bank account, you need to act quickly to rectify the situation. If you don't resolve it right away, you could find yourself in a downward spiral of fees and bounced checks. You could also damage your credit.

Most banks charge a fee if you overdraft your account, usually around $25 to $40. You'll be responsible for paying this in addition to the negative balance on your account. You may also have to pay a returned check fee. These fees can add up quickly. You may find yourself depositing a paycheck and the entire thing covering your overdraft balance and fees.

If you have overdrawn your bank account, take these five steps to rectify the situation.

Stop Using the Account

You should immediately stop using your checking account until you have sorted everything out. This includes any non-essential spending,

You may also consider cashing your paycheck instead of depositing it. If you have direct deposit, you may consider changing that with your employer. If you do not do this, it can be very difficult to recover since the bank will use your check to cover your negative overdraft and other fees. If you reroute your check, you'll still have access to funds to pay your bills and purchase essentials like food and medication while you get the situation under control.

Keep in mind that if your account is overdrawn, you should discontinue all nonessential spending until it's back in the black.

Below are some other steps to take if you've overdrawn your account:

  • Stop all automatic payments from the account.
  • Consider putting your subscriptions on hold.
  • Some gym memberships will let you pause your membership for a month or two. Contact yours to see if that is possible.

Balance Your Account

The next step you should take is to manually balance your account. This will give you an idea of how much you need to turn the situation around. Don't forget to include any returned check or overdraft fees.

You can balance your account in one of two ways: log into your account online to see what you've spent, the checks you've written, the direct deposits you've set up, and any outstanding payments you have. You can also look at your checkbook or account ledger – but that will only be helpful if you have kept a running tab of what you've spent.

If you are not regularly balancing your account, you should definitely start doing so now, especially if you are having issues with an overdrawn account. Start by recording the transactions you make each day and marking off when they clear your account. Remember, balancing your account is more than just checking your balance each day. 

Keep the below in mind when balancing your account:

  • You may need to go back several months to see where the first mistake was made.
  • An overdrawn account can snowball quickly, especially when you consider overdraft fees.
  • Determine how much you need to bring your account back into the positive immediately.

Bring Your Account Balance Positive As Soon As Possible

Perhaps most importantly, bring your account back into the positive as soon as possible. If you are using cash to pay for your purchases, deposit some into your checking account each pay period to help correct the deficit. Consider selling items you do not need or want to help close the gap, as well.

You may want to talk to your bank's customer service representative. Most banks will waive the first overdraft or returned check fee. However, keep in mind that banks are not obligated to refund any fees – and you'll typically get better results if you are polite and ask nicely.

In this situation, remember the following:

  • It never hurts to ask to have an overdraft fee reversed. This can make it easier to recover financially since you'll owe less money.
  • Your bank may also charge a daily fee for each day you are overdrawn. Factor this into your plan to get your account back on track.
  • If possible, you may consider borrowing the money from a friend or family member to bring your account into the positive as quickly as possible and avoid more overdraft fees.

Speak to Your Bank

If you simply owe too much, or you don't think you'll be able to fix your overdrawn account, you should speak with your bank and set up a plan that will allow you to fix the problem without being reported to ChexSystems or damaging your credit score.

Your bank may allow you to set up a payment plan so you can fix the account while still being able to meet your other obligations.

When working with your bank to resolve the issue, keep the below in mind:

  • The bank may set up a payment plan for you to pay the amount back or they may close your account. Either way, you will still be responsible for paying back the money you owe.
  • Direct, polite communication with your bank is the best way to deal with the problem and find a possible solution.

Continue to Monitor Your Account

Once you have cleared everything up, you can continue to use the same account, but it is important to keep a running ledger and stick to a monthly budget to prevent this from happening again.

It is fairly easy to check your account each day to see what has cleared and what has not, especially with mobile banking. It also makes it easier to catch mistakes that the bank may have made or charges that you may have forgotten.

Remember, you cannot simply look at the balance you get online or from the ATM and assume that it is the correct balance, because not all of your checks or debit card transactions may have cleared yet. This is why it's important to keep a running balance of your bank account.

Updated by Rachel Morgan Cautero.