Your bank will charge you a fee, and your account stays overdrawn until you deposit money
When you spend more money than you have in your checking account, the bank covers the difference — but charges you for doing it. This is called an overdraft. Your account balance goes negative (below zero), and you owe the bank both the amount you overspent and an overdraft fee, usually between $25 and $35 per transaction. The account remains overdrawn until you deposit enough money to cover both the negative balance and any fees that have piled up.
What happens next depends on how long your account stays negative and which bank you use. Some banks will close your account if it stays overdrawn for 30 to 60 days. Others may report the debt to a checking account reporting agency, which can make it harder to open a new account elsewhere. If the overdraft is large or stays unpaid for months, the bank may send your debt to a collection agency.
Key Takeaways
- Each overdrawn transaction triggers a separate overdraft fee, so multiple purchases on the same day can result in multiple charges.
- Your bank may refuse to process new transactions once your account is overdrawn, or it may continue to cover them and charge additional fees for each one.
- If you do not deposit money to bring your account positive within 30 to 60 days, the bank will likely close your account.
- Unpaid overdrafts can be reported to ChexSystems or Early Warning Services, making it difficult to open a checking account at another bank.
How overdraft fees stack up quickly
The biggest surprise for people new to banking is that one shopping trip can trigger multiple overdraft fees. If you make three purchases on the same day and your account only has enough money for one of them, the bank may charge you three separate overdraft fees — not just one. This happens because each transaction is processed separately, and each one that exceeds your balance counts as a separate overdraft.
Some banks process transactions in a specific order to maximize fees. They may clear larger purchases first, which causes more smaller purchases to overdraft afterward. Other banks process transactions in the order they were made. Either way, the fees add up fast. An account that starts $50 overdrawn can quickly owe $100 or more once fees are added.
What your bank will and will not do
Banks handle overdrawn accounts differently, so the exact sequence depends on your bank's policy. Most banks will cover the overdraft (pay the merchant on your behalf) and charge you a fee. Some banks will decline the transaction instead, which means the purchase does not go through and you do not get charged an overdraft fee — but you also do not get what you were trying to buy.
You can usually find your bank's overdraft policy in the account agreement you signed when you opened the account, or by asking a teller. The policy will tell you whether the bank covers overdrafts automatically, whether you have to opt in, and how much each fee costs. If you have not opted in to overdraft coverage, the bank will decline transactions rather than cover them.
When the bank closes your account
If your account stays overdrawn for 30 to 60 days without any deposits, most banks will close it. The exact timeline varies by bank. When the bank closes your account, you still owe the negative balance and any fees that have accumulated. The bank will send you a letter explaining the closure and telling you how much you owe.
You have a few options at this point. You can deposit money to pay off the debt, which may allow you to reopen the account or open a new one at the same bank. You can ignore the debt, but the bank may send it to a collection agency, which will contact you repeatedly and can damage your credit. You can also try to negotiate a settlement with the bank — some banks will accept less than the full amount owed if you pay it in a lump sum.
How overdrawn accounts affect your banking future
When a bank closes your account due to an overdraft, it reports this to ChexSystems or Early Warning Services, which are checking account reporting agencies. These agencies keep a record of customers who have left banks with unpaid negative balances. Other banks check these records before opening new accounts, and many will deny you if you appear on them.
This record typically stays on file for five years. During that time, you may be unable to open a checking account at any bank that uses that reporting agency. Some banks specialize in second-chance accounts for people with ChexSystems records, but these accounts often have higher fees and lower spending limits. The best way to avoid this is to deposit money as soon as you realize your account is overdrawn, before the bank closes it.
Steps to take if your account is overdrawn right now
If you just discovered your account is negative, act quickly. Call your bank and ask how much you owe, including all fees. Ask whether the bank will reverse any fees if you deposit money when ready — some banks will remove one or two fees as a courtesy, especially if you have been a customer for a while and this is your first overdraft.
Deposit money as soon as you can to cover the negative balance plus all fees. Even a partial deposit shows the bank you are working to fix the problem. If you cannot deposit the full amount right away, deposit what you can and ask the bank when it will close the account if the balance is not brought positive. This gives you a important date to work toward.
Once your account is positive again, set up a buffer. Keep at least $100 or $200 in your account at all times, even if you have to move it from savings. This cushion prevents accidental overdrafts when you miscalculate your balance or a charge posts unexpectedly.
Overdraft protection as an alternative
Some banks offer overdraft protection, which is different from overdraft coverage. With overdraft protection, the bank links your checking account to a savings account or credit card. If you overdraft your checking account, the bank automatically transfers money from the linked account to cover it. You may be charged a transfer fee (usually $10 to $15) instead of a larger overdraft fee.
Overdraft protection only works if you have money in the linked account. If both accounts are empty, the overdraft protection cannot help and you will still overdraft. Ask your bank whether overdraft protection is available and whether it is automatic or something you have to request. Some people find it helpful; others prefer to decline it and straightforward monitor their balance carefully.
Frequently Asked Questions
Can a bank charge me multiple overdraft fees for one day?
Yes. Each transaction that exceeds your balance is charged separately. If you make five purchases and your account only covers two of them, you will be charged three overdraft fees. Some banks charge one fee per transaction, while others charge one fee per day regardless of how many transactions overdraft. Check your account agreement to see which your bank uses.
Will my credit score be affected by an overdrawn checking account?
An overdraft itself does not appear on your credit report because checking accounts are not credit products. However, if the bank sends your unpaid overdraft to a collection agency, that collection account will appear on your credit report and will damage your score. Paying the overdraft before it goes to collections prevents this.
What if I cannot pay back the overdrawn amount?
Contact your bank and explain your situation. Some banks will work out a payment plan or remove fees if you commit to repaying the balance over time. If the bank refuses and sends the debt to collections, you can negotiate directly with the collection agency. Many will accept a settlement for less than the full amount owed.
Can I open a new checking account while one is overdrawn?
You can try, but most banks will check ChexSystems or Early Warning Services and will see the overdrawn account. Many will deny your process. Some banks specialize in accounts for people with negative banking history, but they typically charge higher fees. Your best option is to pay off the overdrawn account first.
How long does an overdrawn account stay on my banking record?
ChexSystems and Early Warning Services keep records for five years. After five years, the record is removed and you can open a regular checking account at most banks. If you need a checking account before then, look for banks that offer second-chance accounts or that do not use these reporting agencies.