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Posted on January 11, 2021

How an Old Checking Account Can Come Back to Haunt You

October 26, 2020 &• 5 min read by Bob Sullivan Comments 4 Comments

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Old checking accounts can become troublesome if you’re not paying attention to them. Whether they’re overdrawn before you move on to another account or become overdrawn because you’re not monitoring them regularly, they can leave you on the hook for debt.

If you’re not careful, old bank accounts can even affect your credit and the amount your debt will cost you over a lifetime. Understanding how accounts become overdrawn can help prevent these actions from taking place. Find out more about the process and whether a bank can sue you for an overdrawn account below.

How Checking Accounts Become Overdrawn

Overdraft Fees

You’re charged an overdraft fee when the value of the items presented for payment cost more than the available funds in your checking account. Overdraft fees typically range between $25 and $35. If your bank covers the overdraft item, you’ll have to pay back the total overdrawn plus the fee to bring your balance back in line.

For example, if you have $50 in your account and use your debit card for a $100 purchase, your bank might choose to honor the payment while also charging a $25 fee. That means you’re now $75 overdrawn and you owe that money back to your bank.

Non-Sufficient Funds (NSF)

Banks charge a non-sufficient funds fee if an item is presented for payment and funds are not available. Though this amount might be less than an overdraft fee, these “return fees” continue to add up. Each new item presented for payment while your checking account is negative incurs a non-sufficient funds fee.

Other Fees

ATM fees, monthly maintenance fees and inactive account fees are just some items that might eventually cause your account to be overdrawn. If you aren’t using an old account and the bank charges an inactive fee of $7.50 a month, for example, eventually the account may run out of money and have a negative balance.

Ways to Avoid an Overdrawn Checking Account

You can reduce the chances of overdrawing balances with regular account maintenance. Other proactive tips for doing so include:

  • Opting out of automatic overdrafts so payments are only made with the funds in your account. If you try to use your debit card and there’s not enough money in your account, the purchase will be declined.
  • Switching to an account that doesn’t charge overdraft fees. Some banks allow you to connect a savings account to your checking account. Overages are drawn from your savings often without any fees, or a much smaller fee being charged.
  • Using bank alerts to stay updated with your account balance.

How to Fix an Overdrawn Account

To fix an overdrawn account, you must bring the balance back to positive. You do so by depositing funds into the account to cover the amount you owe the bank. For example, if the account is overdrawn by $90, you might deposit $100.

An old account can present some challenges, though. If an old account has a negative balance you haven’t addressed, the bank may close the account and send the debt to collections. The process is known as a charge off, and your bank usually initiates this after your account has been past due for a period of around 60 to 90 days.

The Collection Process and Consequences for Overdrawn Accounts

Once an overdrawn checking account is closed, it’s usually sent to a bank’s collections department. Sometimes the bank hires a debt collection firm to help recover these funds.

Can You Get a New Checking Account If You Owe Your Current Bank?

Collections departments also will often put your checking account into ChexSystems, which maintains a record of delinquent bank accounts. Many banks check this service before allowing customers to open new accounts. This can impair your ability to open new accounts.

Does an Overdrawn Bank Balance Hurt Your Credit?

Simply overdrawing your account won’t hurt your credit if you take care of the issue right away. However, overdrawn balances that are sent to collections can also show up on credit reports as negative items. This can reduce your credit score and make credit harder or more expensive to get.

Can a Bank Sue You for an Overdrawn Account?

If you don’t know about an overdrawn account or ignore it, the bank could eventually take legal action against you. The amount your account is overdrawn is a legal debt you owe, which means the bank can sue you and use legal remedies such as wage garnishment to get the money.

What Is the Statute of Limitations on Collecting Overdrawn Bank Account Debt?

Once your overdrawn bank account enters collections, there is a specified amount of time in which a bank or debt collection agency can sue you. The window for legal action is referred to as the statute of limitations.

Bank debts are considered unsecured debts, and the time frame in which you can be sued varies by state. After this period, your debt becomes time-barred, which means that while you still owe the amount, you can no longer be sued.

When a bank or collection agency tries to sue you after the statute of limitations is up, you should seek legal help. The statute of limitations is often between 3 and 10 years and starts from your last payment date. If you make a payment on a charged off account, it resets your statute of limitations.

Statute of Limitations vs. the Reporting Period

The statute of limitations is not the same as the amount of time your debt appears on your credit report. The reporting period is set by the federal government and determines how long the record of your bank charge off will stay on your credit report. In most cases, debts are removed from your credit report after seven years.

Wrapping Up

Overdrawn checking accounts can cause long term problems if not taken care of as soon as possible. These accounts are referred to credit reporting agencies, and they can affect your credit for years. Your debt can also be sold to third parties who might resort to extreme measures to receive payment. It’s usually best to resolve your balance before it goes to collections whenever possible.

Unsure whether you have an old bank account lurking? Sign up for ExtraCredit to keep an eye on your reports and scores so you know when a collections account might be dragging things down. As an ExtraCredit member, you also get discounts on services, including credit repair from one of the leaders in credit repair service, to help you take control of your financial life now and in the future.


Sign up now.

Source: credit.com

Posted on January 11, 2021

8 Ways to Save Money on Date Night

Planning budget-friendly date nights can keep your relationship and your finances healthy.

Whether you’re cozying up on the couch together with a bottle of wine or headed out to the trendy restaurant everyone’s talking about, date night is an essential part of most relationships.

“Date nights are important because they give new couples a chance to get to know each other and established couples a chance to have fun or blow off some steam after a rough week,” says Holly Shaftel, a relationship expert and certified dating coach. “Penciling in a regular date can ensure that you make time for each other when your jobs and other aspects of your life might keep you busy.”

Finding ways to spend less on date night can be easy if you're willing to be creative.

There’s just one small snag. Or, maybe it’s a big one. Date nights can get expensive. According to financial news website 24/7 Wall St., the cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.

When you’re focused on improving your finances as a couple, finding ways to spend less on date night is a no-brainer. But you may be wondering: How can we save money on date night and still get that much-needed break from the daily grind?

There are plenty of ways to save money on date night by bringing just a little creativity into the mix. Here are eight suggestions to try:

1. Share common interests on the cheap

When Shaftel and her boyfriend were in the early stages of their relationship, they learned they were both active in sports. They were able to plan their date nights around low-cost (and sometimes free) sports activities, like hitting the driving range or playing tennis at their local park.

One way to save money on date night is to explore outdoor activities.

If you’re trying to find ways to spend less on date night, you can plan your own free or low-cost date nights around your and your partner’s shared interests. If you’re both avid readers, for example, even a simple afternoon browsing your local library’s shelves or a cool independent bookstore can make for a memorable time. If you’re both adventurous, check into your local sporting goods stores for organized hikes, stargazing outings or mountaineering workshops. They often post a schedule of events that are free, low-cost or discounted for members.

2. Create a low-budget date night bucket list

Dustyn Ferguson, a personal finance blogger at Dime Will Tell, suggests using the “bucket list” approach to find the best ways to save money on date night. To gather ideas, make it a game. At your next group gathering, ask guests to write down a fun, low-budget date night idea. The host then gets to read and keep all of the suggestions. When Ferguson and his girlfriend did this at a friend’s party, they submitted camping on the beach, which didn’t cost a dime.

The cost of an average date consisting of two dinners, a bottle of wine and two movie tickets is about $102.

– Financial news website 24/7 Wall St.

To make your own date night bucket list with the best ways to save money on date night, sit down with your partner and come up with free or cheap activities that you normally wouldn’t think to do. Spur ideas by making it a challenge—for instance, who can come up with the most ideas of dates you can do from the couch? According to the blog Marriage Laboratory, these “couch dates” are no-cost, low-energy things you can do together after a busy week (besides watching TV). A few good ones to get your list started: utilize fun apps (apps for lip sync battles are a real thing), grab a pencil or watercolors for an artistic endeavor or work on a puzzle. If you’re looking for even more ways to spend less on date night, take the question to social media and see what turns up.

3. Alternate paid date nights with free ones

If you’re looking for ways to spend less on date night, don’t focus on cutting costs on every single date. Instead, make half of your dates spending-free. “Go out for a nice dinner one week, and the next, go for a drive and bring a picnic,” says Bethany Palmer, a financial advisor who authors the finance blog The Money Couple, along with her husband Scott.

4. Have a date—and get stuff done

Getting stuff done around the house or yard may not sound all that romantic, but it can be one of the best ways to save money on date night when you’re trying to be budget-conscious. And, tackling your to-do list—like cleaning out the garage or raking leaves—can be much more enjoyable when you and your partner take it on together.

5. Search for off-the-wall spots

If dinner and a movie is your status quo, mix it up with some new ideas for low-cost ways to save money on date night. That might include fun things to do without spending money, like heading to your local farmer’s market, checking out free festivals or concerts in your area, geocaching—outdoor treasure hunting—around your hometown, heading to a free wine tasting or taking a free DIY class at your neighborhood arts and crafts store.

“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over,” Ferguson says.

6. Leverage coupons and deals

When researching the best ways to save money on date night, don’t overlook coupon and discount sites, where you can get deals on everything from food, retail and travel. These can be a great resource for finding deep discounts on activities you may not try otherwise. That’s how Palmer and her husband ended up on a date night where they played a game that combined lacrosse and bumper cars.

Turn to coupons and money-saving apps for fun ways to save money on date night.

There are also a ton of apps on the market that can help you find ways to save money on date night. For instance, you can find apps that offer discounts at restaurants, apps that let you purchase movie theater gift cards at a reduced price and apps that help you earn cash rewards when shopping for wine or groceries if you’re planning a date night at home.

7. Join restaurant loyalty programs

If you’re a frugal foodie and have a favorite bar or restaurant where you like to spend date nights, sign up for its rewards program and newsletter as a way to spend less on date night. You could earn points toward free drinks and food through the rewards program and get access to coupons or other discounts through your inbox. Have new restaurants on your bucket list? Sign up for their rewards programs and newsletters, too. If you’re able to score a deal, it might be time to move that date up. Pronto.

8. Make a date night out of budgeting for date night

When the well runs dry, one of the best ways to save money on date night may not be the most exciting—but it is the easiest: Devote one of your dates to a budgeting session and brainstorm ideas. Make sure to set an overall budget for what you want to spend on your dates, either weekly or monthly. Having a number and concrete plan will help you stick to your date night budget.

“Staying creative allows you to remain flexible and not bound to simply doing the same thing over and over.”

– Dustyn Ferguson, personal finance blogger at Dime Will Tell

Ferguson says he and his girlfriend use two different numbers to create their date night budget: how much disposable income they have left after paying their monthly expenses and the number of date nights they want to have each month.

“You can decide how much money you can spend per date by dividing the total amount you can allocate to dates by the amount of dates you plan to go on,” Ferguson says. You may also decide you want to allot more to special occasions and less to regular get-togethers.

Put your date night savings toward shared goals

Once you’ve put these creative ways to save money on date night into practice, think about what you want to do with the cash you’re saving. Consider putting the money in a special savings account for a joint purpose you both agree on, such as planning a dream vacation, paying down debt or buying a home. Working as a team toward a common objective can get you excited about the future and make these budget-friendly date nights feel even more rewarding.

Discover Bank, Member FDIC

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Source: discover.com

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