Your bank covers the transaction, charges you a fee, and your account goes negative

When you spend more money than you have in your checking account, your bank can choose to cover the difference. That transaction goes through, but your account balance drops below zero. Within one to three business days, the bank charges you an overdraft fee—typically $25 to $35 per transaction, though some banks charge less and some charge more. Your account stays negative until you deposit enough money to cover both the overdraft amount and the fee.

Not every bank covers overdrafts automatically. Some will decline the transaction instead, which stops the purchase but may still charge a non-sufficient funds (NSF) fee of $25 to $35. Others offer overdraft protection, which links your checking account to a savings account or credit line and pulls money from there instead. The outcome depends on your bank's policy and what you've chosen in your account settings.

Key Takeaways

  • When you overdraft, your bank covers the transaction and your account goes negative, then charges you an overdraft fee within a few days.
  • Overdraft fees typically range from $25 to $35 per transaction, and multiple overdrafts in one day can result in multiple fees.
  • Your bank may decline transactions instead of covering them, which stops the purchase but may still charge an NSF fee.
  • Overdraft protection links your account to savings or a credit line so money is pulled from there instead of creating a negative balance.
  • Staying negative for more than a few days can trigger additional fees and may cause checks to bounce or automatic payments to fail.

How overdraft fees stack up when you make multiple purchases

If you make several purchases while your account is low, each one can trigger its own overdraft fee. A $5 coffee, a $12 lunch, and a $20 gas purchase on the same day could each be covered by your bank, and you could be charged three separate $30 fees—$90 total—even though you only overspent by $37.

Some banks cap the number of overdraft fees you can be charged in a single day, usually at two to four fees. Others charge one fee per transaction with no daily limit. A few banks have stopped charging overdraft fees altogether, or charge them only on larger overdrafts (usually $5 or more). Check your account agreement or call your bank to find out their specific policy.

The order in which transactions post also matters. Banks don't always process transactions in the order you made them. They may post larger transactions first, which can create more overdrafts than if smaller ones posted first. This practice, called reordering, has been restricted by some banks but remains common.

What happens to your account while it's negative

Once your account is negative, you're borrowing from your bank interest-free for a short period. But the longer you stay negative, the more problems accumulate. After a few days, additional fees may appear—some banks charge a daily fee for maintaining a negative balance, ranging from $5 to $10 per day. If you stay negative for more than a week or two, your bank may close the account and send the debt to a collection agency.

While your account is negative, checks you've written will bounce, and automatic payments (rent, insurance, loan payments) may fail. A bounced check can trigger NSF fees from both your bank and the business you wrote it to, adding another $25 to $35 to your debt. Failed automatic payments can damage your credit score and result in late fees from the creditor.

Your bank will also report the negative balance to ChexSystems, a checking account history database. This report stays on file for five years and makes it harder to open a new checking account elsewhere, even after you've paid the debt.

How to get out of a negative balance

The only way to stop the fees and get your account back to zero is to deposit money. Deposit enough to cover the negative balance plus all fees that have been charged. If your account is -$150 and you've been charged $60 in overdraft fees, you need to deposit at least $210.

Once you deposit, the fees stop accruing, but the damage to your ChexSystems record remains. Some banks will reverse one overdraft fee if you ask, especially if it's your first one or if you've been a customer for years. Call your bank's customer service line and explain the situation. They won't reverse all the fees, but a single reversal can save you $25 to $35.

If you can't deposit enough to cover the full negative balance right away, deposit what you can. Your bank may close the account anyway, but at least you've reduced what you owe. Once the account is closed, you'll receive a final statement showing the remaining debt. You can then set up a payment plan with the bank's collections department.

Overdraft protection as an alternative

Overdraft protection links your checking account to another account—usually a savings account at the same bank, or a credit line—so that when you overdraft, money is pulled from the linked account instead. This prevents your checking account from going negative and stops overdraft fees from being charged.

The catch is that you're still spending money you don't have in your checking account. If your savings account is linked and you overdraft, you're draining your emergency fund. If a credit line is linked, you're borrowing at whatever interest rate the bank charges, which is usually higher than overdraft fees if you carry a balance for more than a month.

Some banks charge a small fee ($1 to $3) each time overdraft protection is used, but this is far cheaper than a standard overdraft fee. You can turn overdraft protection on or off in your online banking settings or by calling your bank.

Opting out of overdraft coverage

You have the right to decline overdraft coverage. If you opt out, your bank will decline transactions that would overdraft your account instead of covering them. The transaction won't go through, and you won't be charged an overdraft fee—but you also won't be able to make the purchase.

Some banks charge a non-sufficient funds (NSF) fee even when they decline a transaction, typically $25 to $35. Others don't charge a fee for declined transactions, only for covered overdrafts. Ask your bank which fees explore to declined transactions before you opt out.

To opt out, contact your bank directly or change the setting in your online banking portal. The change usually takes effect within one to two business days. Keep in mind that opting out means you won't be able to overdraft even in an emergency—a purchase will straightforward fail if you don't have the funds.

How overdrafts affect your credit and banking history

An overdraft itself does not directly damage your credit score because it doesn't appear on your credit report. However, if your account stays negative long enough that your bank sends it to a collection agency, that collection account will appear on your credit report and significantly lower your score.

The bigger when ready impact is on ChexSystems, the checking account history database. Any overdraft that results in a negative balance gets reported there, and the report stays for five years. When you try to open a new checking account at any bank, they check ChexSystems. A recent overdraft report makes approval harder or impossible, even if you've paid the debt.

Some banks use a second database called Early Warning Services (EWS) to track overdrafts and other account problems. Reports on EWS also stay for five years. If you've had multiple overdrafts or accounts closed due to negative balances, you may be flagged as high-risk and denied accounts at most mainstream banks.

Frequently Asked Questions

Can my bank charge me multiple overdraft fees for one transaction?

No. Each transaction can trigger one overdraft fee, but a single purchase won't result in multiple charges. However, if you make several purchases on the same day while your account is low, each one may be charged separately. Some banks cap daily overdraft fees at two to four charges.

How long do I have to pay back an overdraft?

Your bank typically expects payment within a few days to a week. If you don't deposit money within that window, the bank may close your account and send the debt to collections. Once in collections, you have no set important date, but the debt remains on your record for up to seven years.

Will my bank reverse overdraft fees if I ask?

Some banks will reverse one fee, especially if it's your first overdraft or you've been a customer for years. Call customer service and ask politely. They won't reverse all fees, but a single reversal saves $25 to $35. Don't expect reversal if you have a history of overdrafts.

What's the difference between an overdraft fee and an NSF fee?

An overdraft fee is charged when your bank covers a transaction and your account goes negative. An NSF (non-sufficient funds) fee is charged when your bank declines a transaction because you don't have enough money. Some banks charge NSF fees only on declined transactions, others on both.

Can I open a new checking account if I have an overdraft on my record?

It depends on how recent the overdraft is and how many you have. A single overdraft from years ago usually won't block you. Recent overdrafts or multiple overdrafts make approval harder. Some banks specialize in second-chance accounts for people with ChexSystems records, but they often charge higher fees.