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 when ready charges you an overdraft fee — typically $25 to $35 per transaction that pushed the account negative, though some banks charge a daily fee instead. The negative balance itself does not disappear. You owe that money to the bank, and it sits there accruing fees until you add funds to bring the account back to zero or positive.

The timing matters. If you overdraw on a Friday, you may not see the fee until Monday or Tuesday, because banks process overdrafts during their end-of-day settlement. Some banks will charge you multiple overdraft fees in a single day if several transactions post while your account is negative. A $50 overdraft can become $100 or $150 in fees alone before you realize what happened.

Your bank will not close your account when ready for going negative once. But if you stay negative for 30 to 60 days without depositing money, the bank will likely close the account and send what you owe to a collections agency. At that point, the debt appears on your credit report and becomes much harder to resolve.

Key Takeaways

  • Overdraft fees are charged per transaction or per day, and they stack quickly if multiple transactions post while your account is negative.
  • The negative balance itself is a debt you owe the bank and does not go away until you deposit money to cover it.
  • If you stay negative for 30 to 60 days without depositing, the bank will close your account and send the debt to collections.
  • Some banks offer overdraft protection or grace periods, but you have to set these up before you need them.
  • Depositing money stops the fees when ready, but you still owe any fees that were already charged.

How overdraft fees are calculated and charged

Banks charge overdraft fees in one of two ways. The first is per-transaction overdraft fees: each transaction that causes your account to go negative or keeps it negative triggers a separate fee. If you swipe your debit card three times while overdrawn, you pay three fees. The second is a daily overdraft fee: the bank charges you once per day (or once per statement period) as long as your account is negative, regardless of how many transactions occur.

The amount varies by bank. Most charge between $25 and $35 per overdraft transaction. Some charge less — $15 to $20 — and some charge more, up to $40. A few banks charge a daily fee of $5 to $10 for each day your account is negative. Check your account agreement or call your bank to find out which method yours uses and what the exact amount is.

The order in which transactions post also matters. Banks do not always process transactions in the order you made them. Many banks process larger transactions first, which can cause more smaller transactions to overdraft than would have if they had posted in order. This practice is called high-to-low posting, and it increases the number of overdraft fees you pay. Some banks have stopped doing this, but others still do.

What happens to the negative balance itself

The negative balance is money you owe the bank. It is not forgiven or written off. If your account goes to -$75, you owe the bank $75 plus any overdraft fees. That debt remains on your account record until you deposit at least $75 to bring the balance to zero.

If you do not deposit money within a certain time frame — usually 30 to 60 days, depending on the bank — the bank will close your account. At that point, the bank reports the unpaid balance to a collections agency. The debt then appears on your credit report as a charge-off or collection account, which damages your credit score and makes it harder to open new accounts or get loans for years.

Some banks will freeze your account before closing it, meaning you cannot make deposits or withdrawals. This is meant to prevent you from using the account while you owe money. If your account is frozen, you have to contact the bank directly to resolve the negative balance and unfreeze it.

Overdraft protection and grace periods

Some banks offer overdraft protection, which automatically transfers money from a linked savings account or credit line to cover overdrafts before they happen. This prevents your checking account from going negative in the first place. However, the bank usually charges a transfer fee — often $1 to $3 per transfer — which is cheaper than an overdraft fee but still costs money. You have to set up overdraft protection before you need it; you cannot add it after your account is already negative.

A few banks offer grace periods or courtesy overdraft waivers, meaning they will not charge a fee if you bring your account back to positive within a set number of days — usually one to five days. These are not may provide; the bank can deny the waiver if you have overdrawn frequently. Grace periods are also not advertised clearly, so you have to ask your bank whether it offers one.

Some banks have eliminated overdraft fees entirely for accounts that meet certain conditions, such as maintaining a minimum balance or setting up direct deposit. If you are considering switching banks, overdraft policy is worth comparing, because the fees can add up to hundreds of dollars per year if you overdraw regularly.

How to stop the fees and resolve the negative balance

Depositing money is the only way to stop overdraft fees from accruing. Once your balance goes back to zero or positive, the bank stops charging daily or per-transaction fees. However, any fees that were already charged are not refunded automatically. You have to ask the bank to reverse them.

Call your bank's customer service line and explain the situation. If this is your first overdraft or if you have been a customer for a long time, the bank may reverse one or two fees as a courtesy. Banks are more likely to reverse fees if you can show that the overdraft was caused by a bank error — for example, a delayed deposit or a transaction that posted out of order. If you overdraft frequently, the bank is unlikely to reverse fees.

If the bank refuses to reverse fees and you believe the overdraft was caused by the bank's error, you can file a complaint with your state's banking regulator or with the Consumer Financial Protection Bureau (CFPB). This does not may provide a refund, but it creates a record that may pressure the bank to reconsider.

Overdrafts and your credit report

A single overdraft does not appear on your credit report. However, if your account stays negative for 30 to 60 days and the bank closes the account and sends the debt to collections, that collection account will appear on your credit report. A collection account can lower your credit score by 50 to 100 points or more, depending on your current score.

Once a collection account appears on your report, it stays there for seven years from the date the account was first reported as delinquent. Even if you pay the debt in full, the collection account remains on your report, though it will be marked as paid. This makes it harder to rent an apartment, get a loan, or sometimes even get a job, because many employers and landlords check credit reports.

If you have a collection account on your report, paying it off does not remove it, but it does stop the bank or collection agency from pursuing further action. If you cannot pay the full amount, some collection agencies will negotiate a settlement for less than the full debt.

Preventing overdrafts before they happen

The most straightforward way to avoid overdrafts is to keep a buffer in your account — money you do not spend, so your balance never actually reaches zero. Even a $100 or $200 buffer can prevent most accidental overdrafts. Set up a spending limit in your bank's app or on paper and stick to it.

Check your balance before making large purchases or before the end of the month when multiple bills post. Many banks offer low-balance alerts via text or email, which notify you when your balance drops below a certain amount. Turn these on and set the threshold to something that gives you time to deposit money before you overdraft.

If you receive paychecks or regular deposits, time them to arrive before your bills are due. If your paycheck arrives on the 15th and your rent is due on the 1st, you will overdraft every month. Ask your employer to change your pay date, or set up a payment plan with your landlord that aligns with your income.

Frequently Asked Questions

Can a bank charge me overdraft fees if I did not authorize the overdraft?

Banks can charge overdraft fees for any transaction that causes your account to go negative, whether you authorized it or not. However, if the overdraft was caused by a bank error — such as posting a transaction twice or delaying a deposit — you can ask the bank to reverse the fees. If the bank refuses, you can file a complaint with the CFPB.

What is the difference between overdraft and insufficient funds?

Overdraft means your account went negative and the bank covered the transaction, charging you a fee. Insufficient funds means your account did not have enough money and the transaction was declined — no fee is charged, but the transaction fails. Some banks charge a fee for declined transactions too, so check your account agreement.

Will my bank close my account if I go negative once?

No. Banks typically close accounts only if the account stays negative for 30 to 60 days without a deposit. A single overdraft that you resolve within a few days will not result in closure. However, if you overdraft repeatedly, the bank may close your account sooner or refuse to reopen it if you try to open a new one later.

Can I negotiate with my bank to waive overdraft fees?

Yes, you can ask. Call customer service and explain the situation. Banks are more likely to waive fees if this is your first overdraft, if you have been a customer for years, or if the overdraft was caused by a bank error. There is no harm in asking, but do not expect a waiver if you overdraft regularly.

Does overdraft protection cost money?

Overdraft protection itself is usually free to set up, but the bank charges a transfer fee each time it moves money from your savings account or credit line to cover an overdraft. This fee is typically $1 to $3, which is cheaper than an overdraft fee but still costs money. You have to set it up before you need it.