You’ve been banking with ABC National Bank for years. They gave you your first car loan, all of the tellers at your local branch know you by name and they’ve always been there for you when you’ve needed to borrow some cash. Currently, you have your checking account and a credit card through ABC National Bank.
Last month, you had to replace the transmission in your clunker and didn’t have the money to make your normal $250.00 per month payment toward your ABC credit card. You figure that you’ll get back on track next month. On the way home from work, you stop to get gas in your car. Things are tight until payday, but you know you can put $20.00 in the tank. You swipe your debit card at the pump and it is declined. You go inside and your card is once again declined at the register. The cashier tells you that you will need to contact your bank to find out what is wrong.
You get back in your car and call your local branch of ABC National Bank. Tara, one of the tellers you know so well, takes your call and puts you on hold while she looks at your account. A minute later, Tara gets on the phone and tells you that your account is overdrawn by $230.00. How is that possible? You know you had $20.00 in there. Tara informs you that the bank has exercised their right of setoff and taken the $250.00 payment for the credit card from your checking account without asking since you didn’t make the payment on your own. Is this legal? What the heck is a setoff?
As surprising as it might be, what ABC National Bank did is legal. If you have a debt with the same bank that you have your checking or savings account with and you don’t make the payment on the debt, the bank can take the payment from your checking or savings account without asking. That is called a setoff. The bank doesn’t have to give you any prior warning and can do it regardless of whether it will overdraw your account or cause other payments to bounce.
If you are to the point that you are unable to make all of your credit card payments each month, you should do two things. First, if you have a credit card with the same bank as your checking or savings account, be sure to make paying that credit card a priority. Second, give Steidl & Steinberg a call. We can review your financial situation for free and tell you if a bankruptcy is a good option for you. We can discuss a Chapter 7 bankruptcy, which allows you to eliminate debt such as credit cards, medical bills, personal loans and payday loans and a Chapter 13, which allows you to repay your debt an affordable rate. Don’t put yourself in a position where your bank can take money from you without asking. Call Steidl & Steinberg at 800-360-9392 to get your financial situation under control.