Is an overdraft that I do not pay on my bank account damaging to my credit

[American Psycho]

I had an unauthorized overdraft on my bank account due to some bank charges before the account was closed. Is this as damaging on my credit profile as a defaulted credit card?

[Modee]

Your post implies that somehow the overdraft was caused by unauthorized charges. If so, report the unauthorized charges to the bank and at the same time that those are reversed, the bank should be willing to reverse any negative effects to your credit or other standing.

In general mishandling a bank account results in your placement in ChexSystems and the like - systems that prevent you from opening bank accounts in the future. However, if you end up owing the bank enough that they sue you over it and obtain a judgment, that public record will ding your consumer credit profile as well.

[American Psycho]

When I said unauthorized I didn't mean fraudulent, I said unauthorized overdraft in that there was no agreed overdraft on the account.

Basically I had an account with Chase that I totally forgot about after I withdrew all the money. They continued charging the account maintenance fee that they do when your balance falls below a certain amount. After a few months it got to something like negative -$100 without any agreed overdraft and they shut down the account.

Would this be reported to ChexSystems? Would it also be reported as a default on my credit profile?

[Modee]

Absolutely, yes - leaving a bank account in the red and walking away from it will have repercussions including Chexsystems for whatever entity or individual has dominion or control of the account.

[American Psycho]

I heard it has to be for at least $100 in the red for them to report it to ChexSystems. Is this true?

[Modee]

It is not ChexSystems that decides what the threshold is - they'll accept any debt for any amount - it is the banks that have been stiffed that decide whether to report the debt to ChexSystems

For example, Bank of America has a $100 threshold for reporting to ChexSystems. Other banks, especially smaller ones, may have lower thresholds. At a minimum any bank where you leave an account in the red will no longer do business with you.

[American Psycho]

You're right, that was what I read! That's quite strange though because my credit card with Chase is still going, could it be it was written off because the charges mounted from the maintenance fees for not maintaining minimum balance?

[Modee]

If it's under a hundred dollars I would just pay it! All negative or charged off debt is noted and recorded internally by a creditor but after enough time has passed and after considering a multitude of other precise factors that I have determined but will not post in public, most but not all (I have the precise list of which will and which will not) creditors will extend new credit to those who have stiffed them in the past.

You'll need tech support to explore this topic further but my advise remains to just pay the two dollars.

[American Psycho]

If I pay it will I automatically come off ChexSystems?

[Modee]

Not necessarily but at a minimum your bad record will be noted as PAID. The same applies for all bad debts - paying them after they have gone into collection or otherwise notated negative status will create a more positive record than that of a deadbeat who walked away from a debt.

There is an approach to handling this that may ensure that it is removed, but as I said: You'll need tech support to explore this topic further.

[American Psycho]

Will it also have been reported as a default on my credit profile? Or not because it was the result of an unagreed overdraft so no technical credit agreement?

[Modee]

In your mind, there is a difference between leaving an account in the red for fees, versus for an NSF check. However, unless you are able to get the bank to courtesy adjust the negative balance, there is no difference whatsoever.

[American Psycho]

Just to follow up, I spent a loooooong time talking to Chase, it turns out they DID report the $75 negative balance on the account to ChexSystems. I paid it off and they said the best they can do is mark it as paid. Interestingly my credit card with them is still going. I asked if they would open another checking account and they said they would but who knows, I find the rep you speak to typically knows nothing.

So Bank of America only report amounts over $100, but looks like Chase report anything.

[Modee]

Thanks for updating us. A $75 ChexSystems is not the end of the world, but a pity to have a ding on your checking credit over such a small amount.

[American Psycho]

Yes it's unfortunate, but it can be a lesson to always keep a close eye on your accounts. If you forget about one you meant to close but then the maintenance fees keep getting deducted it won't be long before they end up shutting it down for you with an overdraft you may not know about.

The good news is the record will only be there about another 3 years, since the account was closed about 2 years ago and ChexSystems only maintains the record for 5 years whereas your credit profile retains data for 7 years. On the other hand I haven't had any real adverse reactions from the record I knew nothing about, like I said my credit cards are still in tact, but then again I haven't been actively applying for anything new.

Be sure to keep a watchful eye on all of your bank accounts!