Over Drafting

Over drafting is the term applied to a checking account that has been asked for money that it does not currently have. In most banks, there are over draft protections available to prevent a person from drawing too much money. When a balance gets low or to zero, the bank will pull money from a savings account or a line of credit to prevent the person from reaching a negative balance and fees.

If a person over drafts too much, he or she will have this tendency to over draft reported to credit agencies and other banking industries. While the over drafting might not affect a credit score the first couple of times, with times a significant over drafting habit will be reported. In addition, this bad habit can result in difficulties opening checking accounts, or other accounts, later on.

In addition to the potential for damage to a credit report or the ability to secure a checking account later on down the road, over drafting can cause a significant drop in the amount of spending money a person has. The banks have created significant fees for over drafting. A $1.00 coffee that causes a bank account to hit the negatives can result in a $35 over draft fee. The fees make a $1.00 coffee a $36.00 coffee. In addition, if the person doesn’t put money into the account as soon as possible, there will be problems with other charges that hit the account. Each charge can result in one of the bank’s exorbitant fees.

Contact a Boston Bankruptcy Lawyer

If you are having significant cash flow problems and are considering bankruptcy to get the creditors off of your bank, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346.