Why Do I Overdraw My Bank Account?

People often have issues with overdrawing their bank account without realizing it. Often, before you spend money, the bank shows you having it in your account. But then you make the purchase and the bank charges you a fee.

What’s most likely happening here is that you have spent money already that the bank hasn’t had time to register.

It’s really the difference between having cash and having money to spend.

Cash is money you have in bills or in your bank account currently.

Money available is money not already been spent and is not needed for an upcoming expense.

For example, if I have $10 cash in my pocket, but I have to spend $8 on a cab home, then I only have $2 to spend.

In a broader sense, if I have to pay my rent next week, I have to subtract that from any amount I have in my bank account to see what money I currently have to spend. Not just rent but any regular payment like utilities or car insurance, as well as any expense I’ve had but not yet paid, like a visit to a doctor that bills you later.

As much as possible, keep track of upcoming payments and expenses you still have to pay. It’s important so you don’t run out of money and not be able to pay for things on time. Late fees and bank overdraft fees add up quickly.

Keeping track will help you avoid unnecessary fees. There are apps that can help you with that, or you could make a spreadsheet.

Going back over things in your head quickly before you spend money is also helpful. Just pause and think about it.

Having cash or money in your account does not mean it’s available to spend.