How to Pay for an Overdrawn Checking Account When You Live Paycheck to Paycheck

Overdrawing a checking account can be unavoidable at times for people trying to balance housing payments, utility bills and other necessary expenses on a limited income. The term "living paycheck to paycheck" means that an individual holds no savings or investments and consistently runs out of money before the next paycheck. Living this way can make it extremely difficult to pay off outstanding debt, but a solid plan can put you back on the right track.

Instructions

1

Contact the institution holding your account and request that it freeze the account and set up a repayment plan. Banks can impose multiple fees and interest charges on overdrawn accounts if the fees are set forth in paperwork signed by the account holder. Speak to a manager in the customer relations or collections department and let her know you intend to bring the account into good standing but that you need the bank to work with you on a solution that benefits both parties.

2

Open a new checking account with another institution if possible. When living paycheck to paycheck, you cannot allow your entire check to disappear into an overdrawn account; you must find an alternate way to cash your checks before the next payday. If you cannot find an institution that will grant you an account, use check-cashing services in cash advance stores or certain convenience and grocery stores.

3

Create a household budget to keep your expenses under your income. Look for ways to reduce expenses in any area of your life. Look at food and entertainment expenses first. Shift your focus to free or inexpensive entertainment rather than more costly entertainment. Buy more fresh ingredients to cook at home rather than eating in restaurants or buying fast food.

4

Designate a set percentage of your weekly income to pay off the overdrawn account. Ten percent is a good rule of thumb for investments, and it works just as well for paying off debt over time. Ten percent is reasonable no matter what a person's income. If someone earns $1,000 per week, for example, he can afford to put away $100 toward debt; if someone earns $100 per week, he can afford to use $10 for debt.

5

Stick to your repayment plan until your account is in good standing. If your bank levied excessive fines and fees on your account in the process, consider opening a new account with a credit union or a friendlier bank after your debt is settled. If your bank was accommodating and understanding, show your appreciation by continuing to do business with it.