Most savings accounts cannot go overdrawn, but some banks allow it
A savings account is designed to hold money you keep rather than spend regularly. Most banks will straightforward decline a withdrawal or transfer if you don't have enough money in the account — the transaction won't go through, and you won't owe anything. Your balance stops at zero.
However, some banks do permit savings accounts to go into negative balance, meaning you owe the bank money. This is less common than overdraft on checking accounts, but it does happen. Whether your account can go negative depends entirely on your bank's policies and the specific account agreement you signed when you opened it.
The key difference from a checking account is that savings accounts typically have fewer transactions and less frequent use. Banks are more cautious about allowing overdrafts on savings because the account's purpose is to build a balance, not to spend from it regularly.
Key Takeaways
- Most savings accounts will decline transactions that would make the balance negative, so you cannot overdraw them.
- Some banks do allow savings account overdrafts, but this is less common than overdraft on checking accounts.
- If your savings account does go negative, you will owe the bank the amount you're short, plus overdraft fees.
- You can find out whether your account allows overdraft by checking your account agreement or calling your bank directly.
- Opting out of overdraft protection prevents your account from going negative, but transactions may still be declined.
How to tell if your savings account can be overdrawn
Your account agreement — the document you received when you opened the account — states whether overdraft is allowed. If you no longer have the paper copy, you can usually find it online through your bank's website by logging into your account and looking for "account documents," "disclosures," or "terms and conditions."
The fastest way is to call your bank's customer service line and ask directly: "Does my savings account have overdraft protection?" They can tell you in seconds whether the account is set up to allow negative balances. Write down the answer and the date you called, in case you need to reference it later.
If your bank does allow overdraft on savings, the agreement will also specify the overdraft fee amount — typically $25 to $35 per transaction that overdraws the account. Some banks charge a daily fee if the account stays negative for more than a few days.
What happens if your savings account goes negative
If your bank permits overdraft and you withdraw or transfer more than you have, your balance becomes negative. You now owe the bank that amount. For example, if you have $50 and transfer $75, your balance is -$25 and you owe $25 plus an overdraft fee.
The bank will typically send you a notice — by mail, email, or both — stating the negative balance and the fee charged. You have a set number of days (often 10 to 30 days, depending on your bank) to bring the account back to zero or positive. If you don't, the bank may charge additional fees for each day the account remains negative.
If the negative balance persists long enough, the bank may close the account and report it to ChexSystems, a banking history database. This can make it harder to open accounts at other banks in the future. Some banks will also pursue collection action if the debt is large enough.
The difference between overdraft and a declined transaction
When a transaction is declined, it straightforward doesn't happen. You tried to withdraw $100 but only have $50, so the ATM or teller says no, and your $50 stays in the account. No fee, no debt, no negative balance. This is what happens at most banks with savings accounts.
When overdraft protection is active, the bank allows the transaction to go through even though you don't have the money. Your balance goes negative, and you're charged a fee. The bank is essentially giving you a short-term loan, and you pay for that service with the overdraft fee.
Some people prefer overdraft protection because it prevents the embarrassment of a declined card or transaction. Others prefer to have transactions declined because it forces them to stay within their actual balance and avoids fees. You can usually choose which option you want by contacting your bank.
How to prevent your savings account from going negative
The simplest way is to opt out of overdraft protection. Call your bank and ask them to remove overdraft from your savings account. Once it's removed, any transaction that would make the balance negative will be declined instead. You won't owe money, and you won't be charged a fee.
You can also set up a low-balance alert through your bank's website or app. This sends you a notification — usually by text or email — when your balance drops below a certain amount you choose, like $100. The alert gives you time to deposit money before you accidentally overdraw.
Another option is to link your savings account to a checking account with overdraft protection. If you overdraw the checking account, the bank will automatically transfer money from savings to cover it. This way, your savings account itself doesn't go negative — the checking account does. However, you'll still pay an overdraft fee on the checking account.
What to do if your savings account is already negative
Deposit money into the account as soon as you can to bring the balance back to zero or positive. The sooner you do this, the fewer additional fees you'll accumulate. If you can deposit the full negative amount plus the overdraft fee, do that. If you can only deposit part of it, deposit what you can.
Call your bank and explain the situation. Ask whether they will waive or reduce the overdraft fee, especially if this is your first time or if the overdraft was caused by an error on the bank's part. Many banks will waive one fee per year for customers in good standing. There's no harm in asking.
If you cannot deposit the money right away, contact your bank and ask about a payment plan. Some banks will allow you to pay back the negative balance over time rather than all at once. This is less common with savings accounts than checking accounts, but it's worth asking about.
Savings accounts versus checking accounts and overdraft
Checking accounts are designed for frequent transactions and spending, so banks are more willing to allow overdraft on them. Savings accounts are designed to hold money and earn interest, so overdraft is less common. However, the rules vary by bank — some banks offer overdraft on both, some on checking only, and some on neither.
If you have both a checking and savings account at the same bank, make sure you understand which one (if either) has overdraft protection. Many people assume their savings account is protected from overdraft when it isn't, or vice versa. Knowing the difference can prevent an unexpected fee.
If you frequently overdraw your checking account, moving money to savings and keeping a smaller balance in checking can help you avoid fees. However, this only works if your savings account doesn't also have overdraft enabled — otherwise you're just moving the problem.
Frequently Asked Questions
Can a bank close my account if my savings goes negative?
Yes, if the negative balance persists for long enough without being paid back, the bank can close the account. The timeframe varies by bank but is often 30 to 60 days. Once closed, the bank may report the debt to a collection agency or pursue other collection action.
Will a negative savings account balance affect my credit score?
Not directly — savings account overdrafts don't appear on your credit report the way credit card debt does. However, if the bank sends the debt to a collection agency, that collection account will appear on your credit report and damage your score.
Can I transfer money from another account to cover a negative savings balance?
Yes, you can transfer from a checking account, another savings account, or an external account if you have it linked. The transfer should bring your balance back to zero or positive. However, if the transfer doesn't go through when ready, you may accumulate additional fees in the meantime.
What if I didn't authorize the transaction that made my account negative?
Contact your bank when ready and report the unauthorized transaction. The bank will investigate and may reverse the transaction and refund the overdraft fee. This is why it's important to monitor your account regularly and report suspicious activity quickly.
Is overdraft protection the same as overdraft fees?
No. Overdraft protection is the bank's permission to let your account go negative. Overdraft fees are the charges you pay when that happens. You can have overdraft protection without paying a fee if you bring the balance back to positive within a certain time, though this is rare.