Dangers of Overdraft Checks and Credit

Overdraft checking accounts due to writing bad checks can cause serious problems to the check writer that could affect him for several years. Writing bad checks is not something to think lightly of. Writing bad checks could be considered unethical if it was intentional. Even unintentional overdrafts can affect the account holder, especially if they are unable to make up the difference out of pocket.

Collection Agencies

Typically an accidental overdraft in a checking account will not affect the account holder's credit, as long as she is able to make up the difference immediately out of her own pocket. If she is unable to make the difference and pay back her accidental debt, then negative repercussions to her credit score could occur. Insufficient funds that are not paid back promptly may be reported to a collection agency by the bank. Collection agencies will report the delinquency to the credit bureau, which could lower the account holder's credit score. The overdraft will then also show up on her credit report, which is available to landlords, schools, potential employers and other banks.

Applying for Credit

The chances of being accepted for a line of credit or a loan are lower when there is a history of bank account overdrafts. According to Kiplinger, lenders look at factors other than your credit score to determine whether or not someone is accepted for a loan or line of credit, such as bank account balance history.

Overdraft Fees

Even if the account holder's credit is not affected, he could become seriously in debt due to overdraft fees. Overdraft fees are generally around $35. A fee is applied to each transaction as soon as a negative balance occurs. If someone used their debit card 10 times for one dollar purchases and his account balance was negative, then this would add up to $350 in overdraft fees.

Telecheck and Chexsystems

Certain companies will immediately report bounced checks to Telecheck and ChexSystems, who then report it to a credit bureau. This can stay on your record up to five years.

Criminal Record

If your checking account is constantly being overdrawn or if you are not paying a negative balance or continuing to write checks once an account balance is negative, in some states you may be arrested. In some states overdrawn a checking account is considered a criminal offense and you could be fined or taken to jail for months to even years depending on your state laws.