Can A Bank Seize Funds From My Checking For My Credit Card Payment?

April 11, 2023 by Poonkulali Thangavelu   Bankrate

A bank cannot typically take money from your checking account to pay off your credit card debt

There are exceptions to this protection. For one, if the bank gets a court judgment against you that doesn’t rule out this offset, it could take your deposited money;In case you risk falling behind on card payments, negotiate with the issuer and look into other financial options so your credit score doesn’t take a hit”

If you owe your friend money, you could pay for their meal at a restaurant. This is called offsetting and is another way of canceling out the debt. But what if you bank with an institution that is also the issuer of your credit card and owe the bank money on the card? Can the bank offset this debt by helping itself to the money you deposit in your account?

Banks Cannot Use Offset For Credit Card Payments

The Fair Credit Billing Act (FCBA), which protects consumers from unfair credit card billing practices, rules that banks cannot typically seize funds deposited into a consumer’s bank account to pay off their credit card. According to the FCBA, a “card issuer may not take any action to offset a cardholder’s indebtedness arising in connection with a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer.” The law recognizes that using an offset provision to go after your credit card debt would give the bank some leverage against you.

However, there are some exemptions to this rule that would allow a bank to take funds deposited to make your credit card payment. For one, you may have authorized your bank to pay off your credit card debt using the money in your checking account. For instance, you might have signed up for an automatic bill payment arrangement.

In spite of any such arrangement, though, if you dispute a credit card payment and ask the bank not to take the payment from your monies deposited, it would have to heed your request.

Court Order Could Allow Bank To Offset

There are other circumstances in which a bank could take money from your bank account to offset credit card debt. For one, the bank could go to court and get a judgment against you. If the judgment doesn’t rule out the offset approach, and there are no state or other laws that prohibit this action, the bank could take your money for the credit card debt.

And in case “the terms of a security agreement permitted the card issuer to place a hold on the funds,” that would also mean the bank can take your money to offset the credit card debt. However, a card issuer cannot routinely include terms in its credit card agreement that give it a security interest in a credit card consumer’s bank accounts.

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