What you should know if you have overdrawn your bank account
Your account may be overdrawn when you take out more money than you have.
Where an account is overdrawn and you have not agreed to an overdraft facility with your financial institution, any money paid into your account can be used by the financial institution to pay back what you owe. This includes any pension, benefit or allowance paid by DVA into your account.
If you receive certain payments, an agreement called the ‘Code of Operation’ exists which limits how much your financial institution can take from money that is paid into your account when your account is overdrawn. The agreement ensures you will have money left over to meet your living costs.
The Code says you can keep at least 90% of specified payments credited to your account in each fortnightly period. This means your financial institution may not use more than 10% of your payments in any fortnight to repay the money you owe, unless you agree to pay more.
If you receive a payment of $200 a fortnight, the Code means you can keep at least $180 (90%) of your payment and the bank can only take a maximum $20 to repay the overdrawn amount.
Participating financial institutions
To find out if your financial institution participates, visit the following member lists:
- Australian Bankers Association members
- Australian Finance Conference
- Customer Owned Banking Organisation members who have signed the Customer Owned Banking Organisation Code of Practice
Exceptions to the Code
You are not covered by the Code if:
- your account is overdrawn due to fraudulent, dishonest or unlawful transactions, conduct or activity by you; or
- a third party is authorised to recover money from your account. For example, where you owe money to a business, who gets a court order to recover money from your account.
You also need to be aware of the costs associated with overdrawing your account which usually consists of interest on the overdrawn amount as well as overdrawing fees. These fees are in addition to any fees usually associated with your account.
If you are concerned about an overdrawn account, you should first talk to your financial institution about the Code and other ways they may be able to help you manage your debt.
DVA Payments covered by the Code
- Crisis payment
- Defence Force Income Support Allowance (DFISA)
- Education Entry Payment
- Income Support Supplement (ISS)
- Periodic Payments of Wholly Dependent Partner’s Pension
- Service Pension (Age)
- Service Pension (Invalidity)
- Service Pension (Partner)
- War Widow(er)’s Pension (WWP)
Centrelink payments covered by the Code
- Age Pension
- Carer Allowance
- Carer Payment
- Disability Support Pension
For a full list of Centrelink payments, please visit the Department of Human Services information page about overdrawn accounts.