4 Reasons You Might be Overdrawn

Being overdrawn on your checking account can sometimes come as a surprise, especially when you’re absolutely certain there is enough money in your account to cover your purchase. Not only will you will be charged an overdrawn fee for your initial purchase, but also for every subsequent purchase or withdrawal made while your account is bare. An overdrawn account is usually an oversight of the account holder, however, there are factors sometimes beyond a consumer’s control that can cause an account to be overdrawn. Here are 4 reasons you might be overdrawn and how to decrease your chances of it:

1. Authorization Holds

Whenever you make a purchase with a debit card, the electronic transfer of funds from your account to the store, require a merchant to finalize the authorization before your bank will release the money. This hold makes your money unavailable to you from anywhere between 1 to 5 days. Even if the merchant does not finalize the transaction the hold will continue for the 5 days and eventually “fall off”. Several problems can arise with this holding period. Many banks do not allow merchants to cancel or void a transaction. If a merchant authorizes a cancellation of the sale, the money will remain unavailable during the 5 day holding period. A merchant may accidentally swipe your debit card twice, creating a double hold on your money. Even though the second authorization will fall off you can become over drawn if that money is needed to cover additional withdrawals from your account. If you’re unsure about what funds are available for your next purchase or withdrawal, check your “pending transactions” for holds that are being authorized on your account

2. Merchant or Bank Error

Human or computer error may cause a larger amount than intended to be withdrawn from your checking account. If a merchant is found responsible for authorizing a $10 purchase as $100, your account can become overdrawn, however, the customer can recover their money through a chargeback to the merchant. The funds will be deducted from the merchant’s account back to the customer, along with a chargeback penalty fee. The bank should be willing to refund the overdrawn fee, since it was at no fault of the account holder. Bank errors will usually be cleared up on their own if an employee notices it, however, you can be proactive to protect your account. Keep a copy of your deposit receipt when depositing money into an ATM to document how much money you put into the machine. Even better, walk into your bank and deposit your money with a teller.

3. Return Check Deposit

Bad checks, or return check deposits are usually the result of the check issuer’s insufficient funds. If you deposit a “bad” check into your account, you will not collect money from that check, and you will be charged a return deposit fee. You will also be charged an overdrawn fee, if you have already withdrawn the money that was supposed to be available. Before you begin to make withdrawals on personal checks, wait for it to clear to avoid the potential fees.

4. ATM Overdraft

If you request more money at an ATM than what’s available in your account, an “overdraft protection” will allow the withdrawal, however, your bank will charge you an overdrawn fee. With overdraft protection your bank will loan you the funds that aren’t available, rather than decline your request. New federal law now prohibits banks from providing overdraft protection without an account holder’s prior consent. If you decide that overdraft protection is something you want, you’ll now have to opt-in to receive it.  

If you do find yourself overdrawn, a good standing account and courtesy when speaking with a bank representative, will go a long way in getting the overdrawn fee reversed.