Your bank will charge you a fee, and the negative balance stays on your account until you deposit money to cover it

When you spend more money than you have in your account, your balance goes below zero. This is called overdrawing your account. The bank does not close your account or report you to a credit agency for a single overdraft. Instead, the bank charges you a fee — usually between $25 and $35 per overdraft — and the negative balance remains until you deposit enough money to bring it back to zero or above.

The fee is the bank's main consequence. Some banks charge one fee per overdraft transaction. Others charge one fee per day your account stays negative, which means the longer you stay overdrawn, the more fees you pay. A few banks charge a fee only if your account stays negative for more than a set number of days, like five days.

Your account does not automatically close, and you do not lose access to it. You can still use your debit card and write checks, though transactions may be declined if the bank's overdraft protection is not turned on. If overdraft protection is on, the bank will cover the transaction and charge you the fee. If it is off, the transaction will be rejected at the point of sale.

Key Takeaways

  • Overdraft fees typically range from $25 to $35 per transaction, and some banks charge additional daily fees if your account stays negative.
  • Your bank will not close your account for going negative once, but repeated overdrafts can lead the bank to close it without warning.
  • Overdraft protection is a setting you control — turning it off prevents transactions from going through if you lack funds, but also prevents overdraft fees on those specific transactions.
  • Going negative does not affect your credit score directly, but unpaid overdraft fees can be sent to a debt collector, which does damage your credit.
  • The fastest way to stop accumulating fees is to deposit money when ready, even if you cannot cover the full negative balance.

How overdraft fees stack up and when they stop

The first overdraft fee hits your account within one to three business days of the transaction that caused the overdraft. If your account is still negative after that, the bank may charge another fee per day or per transaction, depending on the bank's policy.

Some banks set a limit on how many overdraft fees they will charge in a single day — often three to five fees maximum. This means if you make ten purchases on a day when your account is empty, you might pay only three fees instead of ten. Other banks have no daily limit and will charge a fee for each transaction.

The fees stop accumulating once your balance goes back to zero or above. If you deposit $50 into an account that is $100 negative, you now have a negative balance of $50, and the bank will charge another fee the next day if your account is still negative. Once you deposit $50 more and reach zero, the daily fees stop.

What happens if you ignore the negative balance

If you do not deposit money to cover the overdraft, the fees will continue to accumulate every day (or per transaction, depending on the bank). After a certain period — usually 30 to 60 days — the bank may close your account and send the unpaid balance to a debt collector.

Once a debt collector has your account, they will contact you by phone, email, or mail asking you to pay. If you do not respond or pay, the debt collector can report the debt to the three major credit bureaus: Equifax, Experian, and TransUnion. This report will lower your credit score and stay on your credit report for up to seven years.

A closed account also goes into the bank's internal system, called ChexSystems. Other banks can see that you had an account closed due to unpaid overdrafts, and some banks will refuse to open a new account for you. You may be able to open an account at a bank that does not use ChexSystems or at a credit union, which often has different policies.

Overdraft protection: what it does and whether to use it

Overdraft protection is a setting on your account that tells the bank whether to cover transactions that would otherwise be declined. If overdraft protection is on and you try to spend $50 but only have $30, the bank will let the transaction go through, charge you an overdraft fee, and your balance becomes negative $20. If overdraft protection is off, the transaction will be rejected at the register or ATM, and no fee is charged.

Overdraft protection prevents the embarrassment of a declined card in a store, but it also makes overdraft fees automatic. Many people turn it off to avoid fees altogether, accepting that some transactions will be rejected instead. Others turn it on because they would rather pay a fee than have a card declined in front of others.

You can change this setting by logging into your online banking account, calling your bank's customer service line, or visiting a branch in person. The change usually takes effect within one business day. Some banks also offer overdraft protection linked to a savings account or credit card, which means the bank will transfer money from that account to cover the overdraft instead of charging a fee — but you should check whether that transfer itself costs money.

How going negative affects your credit and banking future

A single overdraft does not show up on your credit report and does not lower your credit score. Your credit score is based on your credit history — loans, credit cards, and payment history — not on your checking account. The bank does not report overdrafts to credit bureaus.

However, if the overdraft goes unpaid for 30 to 60 days and the bank sends it to a debt collector, that debt collector can report it to the credit bureaus. At that point, it becomes a collections account on your credit report and will lower your score significantly.

Going negative also affects your ability to open a new bank account. When you explore for a checking account, the bank checks ChexSystems, a database of closed accounts and unpaid overdrafts. If you have a recent overdraft that went unpaid, some banks will deny your process. This is why it is important to resolve overdrafts quickly, even if you can only pay part of the balance.

Steps to take if your account is already negative

The first step is to deposit money as soon as you can, even if you cannot cover the entire negative balance. Depositing $20 into an account that is $100 negative stops some of the daily fees from accumulating and shows the bank that you are working to resolve it.

The second step is to contact your bank and ask about fee reversal. Many banks will reverse one or two overdraft fees per year if you have a good history with them, especially if this is your first overdraft. The bank is not required to do this, but it costs nothing to ask. Call the customer service number on the back of your debit card or visit a branch.

The third step is to check your account for any automatic payments or subscriptions that might be causing repeated overdrafts. If you have a gym membership, streaming service, or insurance payment set to come out of this account, pause or cancel it until your balance is positive. You can restart it later.

If you cannot deposit money right away, contact the bank and explain your situation. Some banks offer hardship programs or will pause overdraft fees temporarily if you are experiencing financial difficulty. These programs vary by bank, but asking is the only way to learn about one is available to you.

How to prevent overdrafts in the future

The simplest way to prevent overdrafts is to keep a buffer in your account — money you do not spend. Many people keep $100 to $200 as a cushion so that small mistakes do not result in overdrafts. This takes time to build up, but even $20 or $30 helps.

The second method is to turn off overdraft protection so that transactions are declined instead of going through. This prevents fees but means you may have a card declined at a store. Some people prefer this because it forces them to notice when ready that they are out of money.

The third method is to check your balance before making large purchases. Most banks let you check your balance online, through an app, or by calling a phone number. Knowing your balance takes 30 seconds and can prevent an overdraft.

The fourth method is to set up low-balance alerts. Many banks will send you a text or email when your balance drops below a certain amount — say, $100. This gives you time to deposit money before you accidentally overdraw.

Frequently Asked Questions

Can a bank close my account for one overdraft?

No, one overdraft will not cause a bank to close your account. Banks close accounts for repeated overdrafts, unpaid overdraft fees that go to collections, or suspicious activity. A single overdraft results in a fee, but your account stays open.

Will an overdraft show up on my credit report?

An overdraft itself does not appear on your credit report. However, if the overdraft goes unpaid for 30 to 60 days and is sent to a debt collector, the debt collector can report it to the credit bureaus, and it will lower your score.

Can I dispute an overdraft fee?

You can ask your bank to reverse the fee, and many banks will reverse one or two per year if you ask politely and have a good account history. The bank is not required to do so, but it is worth calling customer service to request it.

What is the difference between overdraft protection and overdraft fees?

Overdraft protection is a setting that allows transactions to go through even when you lack funds. Overdraft fees are the charges the bank applies when that happens. You can turn off overdraft protection to prevent fees, but then transactions will be declined instead.

How long does an overdraft stay on my record?

An overdraft itself does not stay on any record. If it goes unpaid and is sent to collections, the collections account stays on your credit report for seven years from the date it was reported to the credit bureaus.