An overdrawn bank account has consequences, and it doesn't take much before you're caught in a downward spiral of fees. Overdraft protection will take care of the oversight – if you have it – but this account protection often comes at a cost. However, if you do not have overdraft protection, your account will be in the negative, and you'll probably be charged an overdraft fee. The good news is that your account won't be closed immediately if it is overdrawn, but if you can't pay it back soon, it's best to call your bank straight away.
If you can't pay back an overdrawn bank account, your bank may charge fees or close the account. You'll still need to pay the debt, and the problem can prevent you from opening another account.
Your Account Could Be Closed
While your banking institution may understand that you got into a little trouble, don't expect it to let your account stay in the negative forever. In fact, you need to bring your account out of the red as soon as possible, or your account will be closed. The amount of time that this takes varies depending on the bank, so it's best to either check your bank's account policy agreements or contact the bank directly to stop your account from being closed.
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If you have had the account for a long time, you may get some bonus time for loyalty, but don't count on this. Your bank can close your account for being overdrawn at any time as stipulated in your account holder agreement. However, your bank will be more willing to work with you as long as you remain in communication.
You Still Owe the Bank
After your account has been overdrawn long enough for the bank to close it, you still need to pay this money back – this debt doesn't magically disappear once the account is closed. And, if you had any automatic payments scheduled to come out of the account, you will need to contact those merchants to arrange a different way for you to remit those payments, or you could find yourself deeper in the hole.
Difficulty Opening Another Account
When your account is closed by your bank, not only do you have to worry about squaring up with your bank, you also have to worry about ending up with a negative ChexSystems report. ChexSystems reports on a consumer's banking habits including overdraft history, bank fraud and unsettled accounts. If you do not take care of your overdraft, even if the account is closed, your bank will likely report this to ChexSystems, and this could make it more difficult for you to open another account at a different bank.
Similar to a negative entry on your credit report, negative ChexSystems reporting lets financial institutions assess your risk. If you have a history of leaving accounts overdrawn, banks will be less likely to let you open an account with them.
Get Help With ChexSystems
It is worth noting, though, that you can dispute a negative entry on your ChexSystems report. However, banks are not obligated to remove the negative mark on your ChexSystems report, even if you pay the amount owed. The Fair Credit Reporting Act entitles consumers to one free ChexSystems report per year; check your report, look for any errors and dispute them.
Federal regulations allow a negative mark on your ChexSystems report to remain for seven years; however, the agency generally does not keep records beyond five.