Your bank will charge you a fee, and the negative balance stays on your account until you deposit money to cover it
When your account balance drops below zero, you have entered what banks call an overdraft. The bank covers the transaction that pushed you negative—the check clears, the debit card payment goes through, the ATM withdrawal happens. Then the bank charges you a fee, usually between $25 and $35 per overdraft, though some banks charge more. That fee itself can push you further negative, triggering another fee.
The negative balance sits on your account. It does not disappear on its own. You owe the bank the full amount—both the original overdraft and any fees they charged. Until you deposit enough money to bring the balance back to zero or above, your account remains in the red. Some banks will freeze your account or close it if the negative balance persists for too long, typically 60 to 90 days, though this varies by bank.
Key Takeaways
- Each overdraft typically costs $25 to $35 in fees, and multiple transactions can trigger multiple fees on the same day.
- Your bank will not automatically close your account for being negative, but will close it if the balance stays negative for 60 to 90 days without payment.
- Overdraft protection—a linked savings account or credit line—can prevent overdrafts, but costs money to set up and use.
- Once your account is closed due to nonpayment, the debt goes to a collection agency, and the closure is reported to ChexSystems, making it harder to open a new account elsewhere.
How overdraft fees stack up in a single day
Banks process transactions in an order that is not always the order you made them. Most banks clear larger transactions first, then smaller ones. This matters because each transaction that overdrafts your account triggers a separate fee.
Say you have $100 in your account. You swipe your debit card for $40, then $50, then $20. If the bank processes the $50 first, then the $40, then the $20, you will see three overdraft fees—one for each transaction that pushed you below zero. You could end up owing $100 in overdraft fees on top of the $10 you actually overspent. Some banks cap the number of overdraft fees per day (often at three or four), but not all do.
What overdraft protection is and whether it helps
Overdraft protection is a service that automatically covers overdrafts using money from another account you own—usually a savings account at the same bank—or from a credit line the bank extends to you. When you overdraft, the bank transfers money from your savings account to your checking account instead of charging a fee. Or it draws from a credit line and charges you interest instead of an overdraft fee.
Overdraft protection sounds like it prevents fees, but it does not always save you money. If you link a savings account, the transfer itself may cost $1 to $3. If you use a credit line, you pay interest on the borrowed amount—usually a higher rate than a regular loan. You also have to set up the protection in advance; it does not happen automatically. And if you do not have a linked savings account with money in it, or if you do not may have access to for a credit line, overdraft protection is not an option.
When your bank closes your account for staying negative
Banks do not close accounts when ready after an overdraft. They will usually give you 60 to 90 days to bring the balance positive. But if your account stays negative and you do not deposit money to cover it, the bank will close the account. The exact timeline depends on the bank's policy—some wait longer, some shorter—but most banks will not keep an account open indefinitely when it owes them money.
When the bank closes your account, the negative balance becomes a debt. If you do not pay it, the bank will send the debt to a collection agency. The collection agency will contact you by phone, email, or mail asking for payment. If you still do not pay, the debt can appear on your credit report and affect your ability to borrow money in the future.
How a closed account affects opening a new one
When a bank closes your account due to a negative balance, that closure is reported to ChexSystems, a database that banks use to check your history before opening a new account. Banks see that you had an account closed for nonpayment and may refuse to open a new account for you. Some banks will open an account if you pay off the debt first; others will not open an account for you for several years, even after you pay.
You can request a copy of your ChexSystems report to see what the bank reported. If the information is wrong, you can dispute it. But if the closure was reported accurately, you may need to use a second-chance checking account—a type of account designed for people with banking history problems—until enough time has passed that the closure stops appearing on your report.
How to recover from a negative balance
The fastest way out is to deposit money equal to the negative balance plus any fees. If your account is $50 negative and you have been charged $35 in fees, deposit $85. The balance goes to zero, the fees stop accumulating, and your account is usable again.
If you cannot deposit the full amount at once, deposit what you can. The balance will still be negative, and the bank may still charge you fees if you use the account, but you are moving in the right direction. Some banks will pause fees if you set up a payment plan, though you have to contact them directly to ask.
If your account has already been closed and sent to a collection agency, contact the collection agency directly and ask what they will accept as payment. Some will accept a lump sum; others will set up a payment plan. Once you pay, ask for written confirmation that the debt is settled. This confirmation can help if you later dispute the closure with ChexSystems or try to open a new account.
The difference between overdraft and insufficient funds
An overdraft happens when the bank lets the transaction go through even though you do not have enough money. An insufficient funds transaction is one the bank declines—your debit card is rejected at the register, or a check bounces. With insufficient funds, you do not owe the bank money, but you may owe the merchant a fee for the declined transaction, and the person or business you were paying may charge you for the bounced check.
Whether a transaction overdrafts or gets declined depends on the bank and the type of transaction. Debit card transactions at stores often overdraft because the bank processes them quickly. ACH transfers and bill payments often get declined because the bank checks your balance first. Checks can go either way depending on when the bank processes them.
Frequently Asked Questions
Can a bank charge me multiple overdraft fees in one day?
Yes. Each transaction that overdrafts your account can trigger a separate fee. If you make five transactions that all overdraft, you could be charged five fees. Some banks cap the total number of overdraft fees per day, usually at three or four, but not all banks do this.
Will my bank account automatically close if it goes negative?
No. Your bank will not close the account when ready. Most banks wait 60 to 90 days before closing an account that stays negative. But if you do not deposit money to bring the balance positive within that window, the bank will close it and send the debt to a collection agency.
What happens if I ignore a collection agency calling about my negative balance?
The debt can be reported to credit bureaus and appear on your credit report, lowering your credit score. The collection agency can also sue you to recover the money, though this is less common for small overdraft debts. The longer you ignore it, the harder it becomes to open a new bank account.
Can I dispute an overdraft fee my bank charged?
Yes. Contact your bank and explain why you think the fee was wrong—for example, if the bank processed transactions out of order in a way that caused extra fees, or if you had overdraft protection that should have prevented the fee. Banks sometimes reverse one or two fees if you ask, especially if you have been a customer for a long time, but they are not required to.
How long does a closed account stay on my ChexSystems report?
ChexSystems reports typically stay on file for five years. After five years, the closure should stop appearing on your report, and you will have an easier time opening a new account. Some banks may still refuse to open an account for you even after five years if the debt was never paid.