Debit cards are simple to operate, especially in sending money. Some studies show that when customers use debit cards instead of paper checks, they spend 20% to 30% more.
Normally, an overdraft occurs when you spend more money than you have in your account and your bank covers the difference.
On some occasions, people are forced to turn to extreme measures, such as applying for personal loans when they “need cash quickly,” while others consult a debt relief organization to learn how to get out from under onerous debt.
There have been some regulatory improvements that may provide some respite from the vicious cycle of overdraft fees, negative balances, and unpaid payments.
In this article, I will show you different ways you can overdraft a debit card. Carefully read through.
About Debit Card Overdraft Service
The Debit Card Overdraft Service is a service that allows you to borrow money using your debit card.
For this to apply to your account, you must opt into the Debit Card Overdraft Service.
When you don’t have enough available balance to cover your debit card transactions or ATM withdrawals, you can use this service.
If we do, your account will become overdrawn, and an overdraft fee will be applied.
If this happens, you must deposit or transfer funds into your account as quickly as possible to restore the account’s positive balance.
Even if you choose to use the service, we reserve the right to refuse to fund your transactions and overdraw your account. Your transaction may be declined at some point.
If you don’t sign up for Debit Card Overdraft Service and don’t have enough money, your ATM withdrawals and ordinary debit card purchases will be denied.
If you don’t have enough Available Balance in your account, you may want to Opt-Out to avoid paying overdraft penalties by having your ATM or debit card purchase denied.
Alternatively, you may opt for Debit Card Overdraft Service and be willing to pay an overdraft fee in exchange for the service’s ability to help you avoid denied transactions at a store or ATM, at our discretion.
Read Also: How Do Prepaid Debit Cards Work?
What does it mean to be overdrawn on a debit card?
It means you’re going to use your credit card to buy something even though you don’t have enough money in your checking account.
If you choose to use your bank’s overdraft protection, the transaction will go through but you’ll be charged an overdraft fee – generally $35.
Is it possible to overdraft a debit card at an ATM?
Yes, to put it succinctly. However, you must ensure that you have chosen that option at your bank. It is cheaper to overdraw at an ATM than to use your debit card many times.
Because each transaction costs $35, it’s preferable to withdraw $100 and pay $35 in fees than to use your card for a few minor purchases that would cost you more than $100 in fees.
Is it possible to make a withdrawal from a negative account?
Yes, you certainly can! If you sign up for overdraft protection with your bank, you’ll be allowed to withdraw money from a negative account and avoid the embarrassment of having your debit card denied in a store.
When you truly need to buy something before your next paycheck, withdrawing from a negative account can be helpful.
You should use alternative protection services if you find yourself in a scenario where you actively desire to overdraft.
Why do people overdraw their accounts?
Purchases are not being tracked.
Scheduled Payments Deducted Early
Automatic payments from your bank account can be set up for gym memberships, insurance payments, and even medical expenditures.
In most cases, you get to pick the withdrawal date. Each of these payments, however, can be claimed up to four days early!
If you were counting on your mid-month payday and a holiday is approaching, those draft payments will be processed BEFORE your paycheck arrives. Of course, this can lead to an overdraft on your account.
You might believe that every transaction made with your debit card is promptly logged in your account.
It appears to be at the gas station! However, the unfortunate reality is that many purchases take up to 24 hours to appear.
This may not be a problem if you keep track of all of your expenditures, but if you rely on the bank’s bookkeeping, you might be in big trouble.
Allowing Overdrafts vs. Denying Overdrafts
Allowing overdrafts will be an option provided by your bank. Overdraft protection has both advantages and disadvantages:
- Overdrafts are permitted.
- You are charged a $35 overdraft fee for each transaction.
- Your checking account balance may go negative.
- You are not required to pay a returned check fee to retailers.
- You don’t have to pay late fees on invoices you’ve already paid since the bank will cover them.
Overdrafts are not permitted.
- Fees for returned checks pile up.
- If your check is returned, you must pay using a money order.
- At the register or the gas pump, your debit card will be refused.
- Late fines are frequently applied to accounts for which a check payment was returned.
- Retailers may refuse to accept your checks.
On Purpose Overdrafting
The term “overdraft” has a negative connotation, and no one wants to intentionally overdraw their accounts.
Allowing overdrafts, on the other hand, ensures that your payments are covered. Allowing overdrafts can help you if you aren’t prone to overspending.
Also, allowing overdrafts might ruin your finances if you are living paycheck to paycheck. It is quite expensive to pay each fee.
Apps and Savings
You can even overdraft a savings account that is linked to your checking account with most institutions.
If you have a negative balance in your checking account, the bank will automatically transfer funds from your savings account.
Many banks offer this service for free. Others levy a service charge. Alternatively, you can download one of the many free programs that allow you to make the transfers yourself.
How to Use a Debit Card to Overdraft
To use a debit card to overdraft, follow the steps below:
1. Purchases Were Not Tracked Properly
When it came to budgeting, the old-fashioned paper checks had one advantage: they left a paper trail.
Even if you didn’t take the time to fill them out, you could keep track of your purchases by counting check stubs.
Carbon copy checks enable you to tally up your specific costs. With a debit card, however, all you need to verify you’ve spent money is a receipt, which is easily misplaced.
Some people keep track of their debit card purchases in a checkbook register and compute their amount after each transaction.
In fact, something akin to this is about the only method to make sure you don’t spend more money than you have in the bank.
Even if you write a paper check, it is now processed electronically and deducted from your account at the point of sale.
You don’t have time to cover the check in the next 2-3 days. As a result, keep track of your purchases.
2. Recurring Fees Can Be Paid Off Early
You presumably agreed on a payment date with your providers, such as the 15th or the 30th, if you enable your health insurance or mortgage payment to be deducted directly from your bank account each month.
Holidays, weekends, and technical difficulties can all lead to these payments being made early, and money can be taken out up to four days before the planned date.
This transaction may cause future debit card operations to overdraw your account if you are not prepared with sufficient cash.
3. Authorizations in the works may be more or less than what is owed.
When you fill-up your car or check into a hotel, a specific amount of money is deducted from your account to assure future payment.
While you wait for the true charge to clear, these held amounts can be bigger or smaller than the actual amount you owe, making it difficult to plan for purchases.
If you’re unsure how much money is being held, inquire at the moment you give your debit card information to the shop.
They should be able to tell you how much the pending charge is so you can manage your remaining finances better.
4. Transactions may be updated once every 24 hours or less.
While most banks are going to more up-to-date reporting tools, some are still stuck in the Stone Age, updating your online balance only once every 24 hours.
If you rely on transaction activity to figure out how much money you have left to spend, it will only complicate your efforts to avoid going overdrawn.
Keep track of all debts as they occur and rely on your accounting, not the bank’s, to ensure you have enough money to cover all transactions.