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Having a credit card can be a great convenience. It lets you buy things and pay for them later. But if you don’t make your payments on time, the credit card company may go into your bank account to get the money they think you owe them. This makes me wonder if it is legal for them to take money out of your bank account without your permission.
How Credit Card Companies Collect Debts
A credit card agreement says that when you open an account, you agree to pay back any charges as stated in the agreement. If you don’t make the minimum payment, the credit card company will start to collect the debt. Here are some common steps they may take:
- Call and send letters requesting payment
- Report missed payments to credit bureaus, damaging your credit score
- Raise your interest rate for non-payment
- Cancel or reduce your credit limit
- Turn your account over to a collection agency
- Take legal action and sue you for the debt
Throughout this process, the credit card company is hoping you will pay voluntarily If you don’t, legal action may follow
Lawsuits and Judgments Against Cardholders
If the credit card company tries to collect the debt more than once and fails, they may sue you. In a lawsuit they have to prove .
- You entered into a contract by opening the credit card account
- You failed to hold up your end of the contract by not making payments
- They suffered financial harm as a result
If they win they will get a court judgment against you for the amount owed. This gives them significant power to go after your assets including money in your bank accounts.
How Judgments Allow Access to Your Bank Accounts
A judgment turns an unsecured credit card debt into a debt that can be collected by the government. This lets the plaintiff (your credit card company) use the court system to get money from you. With a judgment, they can:
- Garnish your wages – Recover money directly from your payroll
- Put liens on your property – Prevent you from selling assets like your home until the debt is paid
- Levy your bank accounts – Seize money from your checking or savings account
Banks are legally required to comply with a garnishment or levy order issued by a court.
Limits on Amounts That Can Be Taken
Federal and state laws offer some protections on the amounts that can be levied from your bank account:
- Social Security, disability income, and certain other sources are exempt from garnishment. Any funds from exempt sources are off-limits.
- The bank must leave you at least some minimum amount after a levy. For example, Florida exempts $1000 in a checking account.
- Weekly garnishment of disposable earnings is capped, typically at 25%. This applies to wage garnishments, not bank levies.
While limits exist, creditors can still recover significant sums directly from your bank account after getting a judgment.
How to Prevent Your Accounts From Being Levied
Here are some tips to keep creditors away from the money in your bank accounts:
- Communicate with the credit card company. Set up a payment plan if possible. Their goal is to get paid, not levy your account.
- Pay off the account and avoid legal action. This is the only guaranteed way to protect your accounts.
- Try to settle for less than you owe. Offering a lump-sum discount payment may stop them from suing.
- Bank with an exempt institution. Some special credit unions and banks are exempt from garnishment orders.
- Open a separate exempt account. Certain types of accounts are protected from creditors.
- File for bankruptcy. This immediately halts all collection and lawsuits. Accounts are protected while in bankruptcy.
Acting quickly gives you the most options. Once a judgment is issued, the credit card company has the court’s permission to go after your bank accounts.
Frequently Asked Questions
Still have questions? Here are answers to some common queries about credit card companies and bank account levies:
Can they take money from my account without suing me first?
No. There must be a legal judgment in place ordering your bank to release funds.
What if I file bankruptcy after my account is frozen?
The bankruptcy halts the garnishment. The account freeze will be lifted.
What types of bank accounts are protected?
Certain retirement, education, and disability accounts cannot be levied.
Can they take my tax refunds or stimulus money?
No. Refunds and government payments are exempt.
Do I get notice before my account is frozen?
Yes, the bank must notify you of any legal orders it receives pertaining to your accounts.
The Bottom Line
While credit card companies cannot legally withdraw money from your accounts without permission, through the courts they can get orders to seize funds to pay debts you owe. This makes it critical to take action quickly if your credit card company threatens to sue you over missed payments. Seeking professional help from a credit counselor or bankruptcy attorney can go a long way in protecting your bank accounts.
Can a bank take money from your account without permission?
Credit card companies cannot take money out of your checking account without your permission, even if both accounts are from the same bank. If you have a Chase credit card and checking account and you are late on your credit card payment, for example, Chase cannot seize the funds in your checking account to cover it.
This is good news for consumers who want to maintain control over their funds. However, banks may get the authority to seize funds from a bank account based on certain legal proceedings. We’ll go over how that works in more detail below.
If you owe a bank money, can they take it from another bank account?
If you have credit card debt with a bank but you have money deposited with another institution, the same rules still apply. Your credit card issuer cannot legally seize funds from any bank account you have unless an exception (like a court order or judgment) applies.