Have you ever tried to withdraw more money than your account balance? A declined card transaction, which occurs when insufficient funds are available, is a cause for concern for any individual. More concerning should be their withdrawal beyond their account balance as it attracts bank overdraft fees. Overdraft protection ensures that account holders can borrow beyond their account balance. Accessing overdraft protection comes with a caveat that banks charge an average of $34 for each transaction. Different banks have different overdraft fees so we recommend comparing this fee before setting up an account:
What Happens When You Withdraw More Money Than Your Account Balance
It is possible to withdraw funds beyond the account balance. Such withdrawals are, however, subject to bank terms. First, it is important to distinguish whether the withdrawal was in excess of the available funds or the total funds. Secondly, it is important for account holders to understand the repercussions of overdrawing their accounts and how to protect against it through overdraft protection.
Banks only allow the withdrawal of funds within the available funds within an account. Shockingly, rejection of subsequent transactions takes place even with funds in the bank account. Banks distinguish available funds as funds accessible for depositors withdrawals with total funds being net deposits that include available funds and unprocessed funds such as uncleared cheques. Account holders should understand the difference between available and total funds as funds withdrawn beyond available funds will be deemed to be overdrafts that can incur penalties. Overdraft penalties will be paid out of new deposits with the net amount being accessible to account holders.
It is important to understand that an account holder can only access available funds despite having unprocessed deposits that appear in the total account balance. Withdrawing beyond available funds is possible but it attracts punitive overdraft fees.
Overdraft Fees When You Withdraw More Money Than Your Account Balance
Using overdraft protection can allow bank account holders to withdraw in excess of their total account balance with minimal overdraft fees. Overdraft protection is a service by financial institutions to bank account holders to allow overdrawing of their accounts. Banks offer multiple overdraft protection services that are suitable for different account holders needs. Account holders can choose to allow overdrawing of their accounts by charging their other bank accounts such as credit cards, a line of credit or saving accounts. Optionally, the account holder may set up a courtesy pay relationship with the bank. In such an engagement, the bank pays the overdrawn amount which, the account holder should reimburse within 30 days. Despite the fact that withdrawing beyond account balance holds a few benefits to the account holder, it carries heft charges. According to an NCPB study, on average banks charge $34 per overdraft protection transaction.
When account holders opt-in to overdraft protection, it is possible to withdraw funds beyond the available and total account balance. Account holders can opt to link their other accounts for money to be withdrawn from these accounts in case of an overdraft. Optionally, with a ‘courtesy pay’ agreement the bank can settle overdrafts that should be paid within 30 days.
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