Your bank will charge you a fee, and the amount owed grows until you deposit money

When your account balance drops below zero, you have overdrawn your account. The bank treats this as a short-term loan to you. You will be charged an overdraft fee — typically $25 to $35 per transaction that pushes you negative, though this varies by bank. Some banks charge a single fee per day instead, while others charge a fee for each transaction that occurs while you are negative.

The negative balance itself does not earn interest the way a loan does, but the longer you stay negative, the more fees accumulate. If you deposit $50 into a $100 overdraft, you now owe the bank $50 plus whatever fees have been charged. You must deposit enough to cover both the original negative amount and the fees to bring your account back to zero.

Your bank will not close your account when ready after one overdraft. However, if overdrafts happen repeatedly or the account stays negative for weeks, the bank may close it and report you to ChexSystems, a banking history database. This makes it harder to open accounts at other banks for several years.

Key Takeaways

  • Each overdraft transaction typically costs $25 to $35 in fees, and fees continue to pile up the longer your account stays negative.
  • You must deposit enough money to cover both the negative balance and all accumulated fees before your account returns to zero.
  • Repeated overdrafts can result in your bank closing your account and reporting you to ChexSystems, making it difficult to open new accounts elsewhere.
  • Some banks offer overdraft protection or grace periods that prevent fees on small, short-term negatives — ask your bank what options exist.
  • The fastest way out is to deposit money as soon as you realize you are negative, because fees stop accumulating once your balance is positive again.

How overdraft fees are charged

Banks charge overdraft fees in different ways, so the total cost depends on your specific bank and how long you stay negative. The most common structure is a per-transaction fee: if you make three purchases while your account is negative, you pay three overdraft fees. Some banks charge one fee per day instead, regardless of how many transactions occur. A few banks charge a single fee the first time you go negative, then additional fees only if you stay negative past a certain number of days.

The fee itself is set by your bank and does not change based on how far negative you are. A $5 overdraft and a $500 overdraft both cost the same fee. This means small overdrafts are proportionally expensive — a $35 fee on a $10 overdraft is a much steeper cost than a $35 fee on a $300 overdraft.

Some banks offer a grace period of a few hours or until the end of the business day, during which you can deposit money and avoid the fee entirely. Others charge the fee when ready. Call your bank or check your account agreement to learn which structure applies to you.

What happens to your account while it is negative

Once your account is negative, the bank will not prevent new transactions from occurring — they will straightforward charge you another overdraft fee for each one. This is why a single mistake can quickly become expensive. If you overdraw by $10 and then make four more purchases before you realize it, you may now owe $140 in fees plus the original $10.

Your bank may also freeze your account if the negative balance is large or has been unpaid for a long time. A frozen account means you cannot make withdrawals or transfers, though deposits will still be accepted. The bank does this to protect itself while waiting for you to repay the negative balance.

If you have automatic payments set up — such as a subscription or loan payment — those will still attempt to process even if your account is negative. Each one will trigger another overdraft fee. The best when ready step is to contact your bank and ask them to pause or cancel automatic payments until you have deposited money.

Overdraft protection and alternatives

Some banks offer overdraft protection, which automatically transfers money from a linked savings account or credit line when your checking account would go negative. This prevents the overdraft fee but may charge a smaller transfer fee instead — usually $1 to $3. If you have a savings account at the same bank, linking it for overdraft protection can be much cheaper than paying overdraft fees repeatedly.

Another option is to ask your bank about overdraft opt-in. Banks are required to ask whether you want overdraft protection on debit card and ATM transactions. If you opt out, those transactions will be declined rather than charged an overdraft fee. This prevents you from going negative in the first place, though it means your purchase will fail at the register.

Some banks also offer a small cushion or buffer — a few dollars of negative balance before the first fee kicks in. This is less common than it once was, but it is worth asking about when you open an account.

Reporting to ChexSystems and your credit

An overdraft itself does not appear on your credit report or affect your credit score. However, if you do not repay the negative balance and the bank closes your account, they may report you to ChexSystems. This is a separate system from credit bureaus — it tracks banking history, not credit history.

A ChexSystems report stays on file for five years and makes it very difficult to open a new checking or savings account during that time. Many banks check ChexSystems before opening an account, and a negative report will result in a denial. Some banks specialize in second-chance accounts for people with ChexSystems records, but these often come with higher fees and lower account limits.

If your account is closed due to a negative balance, the bank will send you a notice. At that point, you still owe the negative amount. The bank may attempt to collect it through a debt collector, which could eventually affect your credit if it goes unpaid long enough.

Steps to take if your account is negative right now

The first step is to deposit money as soon as possible. Even a small deposit stops new overdraft fees from accumulating. If you can deposit enough to cover the negative balance plus all fees, do so when ready. If you can only deposit part of it, deposit what you can — this slows the damage.

Call your bank and ask them to pause any automatic payments or recurring charges. Explain that your account is negative and you are working to repay it. Many banks will temporarily stop automatic transactions if you ask, which prevents additional fees from piling up while you gather funds.

Ask your bank whether they will waive or reduce the overdraft fees. Banks sometimes do this, especially if you have been a customer for a long time or if this is your first overdraft. There is no may provide, but it is always worth asking — the worst they can say is no.

If you cannot deposit enough money to cover the negative balance within a few weeks, contact your bank and ask about a payment plan. Some banks will work with you to repay the amount over time rather than demanding it all at once. This keeps your account open and prevents a ChexSystems report.

How to avoid overdrafts in the future

The simplest approach is to keep a small buffer in your account — money you do not spend. Even $50 or $100 cushion prevents accidental overdrafts from small mistakes. Many people find it easier to think of their true balance as $100 less than what the bank shows, so they never actually spend down to zero.

Set up account alerts through your bank's app or website. Most banks let you receive a text or email when your balance drops below a certain amount — say, $200. This gives you a warning before you get close to zero. Some banks also offer alerts specifically for overdraft activity.

If you have a savings account, link it for overdraft protection. The small transfer fee is far cheaper than overdraft fees, and it prevents the account from going negative in the first place. This is especially useful if you have variable income or irregular expenses.

Review your recurring charges — subscriptions, gym memberships, insurance payments — and make sure you know exactly when they come out each month. Many overdrafts happen because someone forgot about a charge that hits on a specific day. Write these dates down or set phone reminders.

Frequently Asked Questions

Can my bank refuse to let me open a new account if I had an overdraft?

An overdraft alone does not prevent you from opening an account. However, if the bank closed your account and reported you to ChexSystems, other banks will likely deny you. You can still open accounts at banks that specialize in second-chance banking, though they typically charge higher fees.

If I pay off the negative balance, do the fees go away?

The overdraft fees you have already been charged do not disappear when you deposit money. You must pay both the negative balance and all accumulated fees. Some banks will waive fees if you ask, but they are not automatically removed.

What if I dispute a transaction that caused the overdraft?

If you successfully dispute a fraudulent transaction, the bank will reverse it and the overdraft may disappear. However, you are still responsible for any overdraft fees that were charged while the dispute was pending. Ask your bank whether they will refund those fees once the dispute is resolved.

Does overdraft protection cost money?

Overdraft protection itself is usually free to set up, but using it may cost a small transfer fee — typically $1 to $3 per transfer. This is much cheaper than a $25 to $35 overdraft fee, so it is a good trade-off if you overdraw occasionally.

How long does it take for my account to be reported to ChexSystems?

Banks do not report to ChexSystems when ready after an overdraft. The report happens only if your account is closed due to an unpaid negative balance, usually after several weeks or months of non-payment. If you repay the balance before the account is closed, no report is filed.