Can you overdraw a savings account ?

I have been asked this question repeatedly and have never been able to find a clear answer. Can you overdraw a savings account? And I am not talking about charging an "overdraft fee". Customer deposits a $50 check into a savings account. The check comes back fraudulant. The savings account now only has $1.53 in it. Can we debit the $50.00 leaving the account overdrawn??? If not, is this a state law or federal law? Is it an internal decision? Nobody here knows. They has just always been told that you can't overdraw a savings account.

Any help would be greatly appreciated to put this question to rest.

Let me ask this. If you did not debit the account in the scenario you mentioned above, what do you do with the $50.00? Write it off?

How does the customer know the check has been returned on their account and they owe you money if the checks is never processed?

I know of no state or federal law (even though there may be one) that says you cannot do this; we do and inform the customer in the appropriate manner.

I am sorry I am just getting to saying thank you for your answer. And yes, believe it or not, from my understanding they would be writing it off. I do believe though that they are contacting the customer.

I just couldn't understand why you couldn't overdraw a savings just like you would a checking account and charging an overdraft fee(provided this was stated in the account agreement). Like I said, they have just always been told that you can't overdraw a savings account. Another person said she thought it had something to do with a transaction account vs. a "time deposit" account.

I did put this question to our legal council, but have not heard back except for "I will have to further research this"........

People can also overdraw their own savings accounts. It happens all the time, they go to a tyme machine, pull out their money. Then they go to a teller 10 minutes later and take out the money, before the ATM system has let the bank know about the debit. The account is now overdrawn.

We would certainly charge the account the $50 bounced check and try to collect before writing it off. We do it all the time.

Just make sure your accounting system handles overdrafts on savings accounts correctly. Some system will net total savings deposits rather than hold overddrafts out separate like in checking accounts. It will raise havoc with your reserve and call reporting.

Good point Randy. I didn't think of the system requirements as ours has had that capability.

Thank you for your information. I will check on our accounting system, maybe that is our problem.

In previous research, I did read about savings accounts and the call report. Now I kind of understand the relationship.

Thanks again!

I am so glad to see this post. We are also wanting to make sure that there isn't any regulation that would not allow us to put it into negative for service charges.

Thanks