Your bank will charge you a fee, and the money you owe grows until you deposit enough to cover it

When you spend more money than you have in your account, your balance goes negative — you now owe the bank money. The bank charges you an overdraft fee (sometimes called a non-sufficient funds fee or NSF fee) for letting this happen. The amount varies by bank, but typically ranges from $25 to $35 per transaction that overdrafts your account. If you stay negative for several days, the bank may charge you another fee for each day you remain overdrawn.

The negative balance itself does not disappear on its own. You owe that money to the bank, and it sits in your account as a debt until you deposit funds to cover it. Some banks will close your account if you stay negative for too long without paying it back — usually 30 to 60 days, depending on the bank's policy.

The fastest way to stop the fees is to deposit money that brings your balance back to zero or above. Once your balance is positive again, no more overdraft fees will be charged for that incident. However, if you overdraft again before fixing the first one, you will be charged another overdraft fee on top of the original debt.

Key Takeaways

  • Each overdraft transaction triggers a fee of roughly $25 to $35, charged by your bank.
  • The negative balance remains in your account as money you owe the bank until you deposit enough to cover it.
  • Banks may charge daily fees if your account stays negative for more than a few days.
  • Your account can be closed if you remain overdrawn for 30 to 60 days without depositing money to fix it.
  • Depositing money to bring your balance back to zero or above stops new overdraft fees from being charged.

How overdraft fees stack up quickly

Overdraft fees are designed to discourage overspending, but they can add up fast if you are not careful. If you overdraft your account three times in one week, you could be charged three separate overdraft fees — one for each transaction. Some banks charge a fee for each day your account stays negative, on top of the transaction fees.

For example, if your balance is $50 and you make a $75 purchase, you overdraft by $25. The bank charges you a $30 overdraft fee. Now you owe $55 ($25 overdraft plus the $30 fee). If you make another purchase before depositing money, you will be charged another $30 fee, bringing what you owe to $85. This is why people sometimes describe overdraft fees as a "trap" — the fees themselves make it harder to get back to a positive balance.

What happens to your credit report

An overdraft by itself does not show up on your credit report or hurt your credit score. Your bank does not report overdrafts to the credit bureaus (Equifax, Experian, and TransUnion) the way they report missed loan payments or credit card debt.

However, if your account stays negative for a very long time and your bank sends your debt to a collection agency, that collection account will appear on your credit report and damage your score. This usually happens only if you ignore the debt for several months. If you deposit money to cover the overdraft within a reasonable time — typically a few weeks — your bank will not send it to collections.

Overdraft protection and overdraft lines of credit

Some banks offer overdraft protection, which automatically transfers money from another account (like a savings account) to cover a shortfall in your checking account. This prevents your balance from going negative in the first place. If you have overdraft protection linked to a savings account, the bank will move money over instead of charging an overdraft fee.

Other banks offer an overdraft line of credit, which works like a small loan. If your account goes negative, the bank covers the shortfall with borrowed money instead of charging a fee. You then pay interest on that borrowed amount — usually a higher rate than a regular loan, but sometimes lower than the cost of repeated overdraft fees. You can ask your bank whether either of these options is available to you.

How to recover from a negative balance

The first step is to deposit money to bring your balance back to zero or above. You can deposit cash at an ATM, transfer money from another account, have a paycheck deposited directly, or ask someone to send you money. Once your balance is positive, no more overdraft fees will be charged for that incident.

After you have covered the overdraft, contact your bank and ask whether they will reverse (cancel) the overdraft fee. Many banks will reverse one fee per year if you have been a customer in good standing. This is not may provide, but it is worth asking — the worst they can say is no. Be polite and explain that you made a mistake and have now fixed it.

If your bank refuses to reverse the fee, you can also ask to speak with a supervisor or manager. Some banks have more flexibility than others, and a supervisor may be able to help even if the first person you speak with cannot.

How to avoid overdrafting in the future

The simplest way to avoid overdrafts is to keep a small cushion of money in your account — even $50 or $100 — that you do not spend. This buffer means that small mistakes or unexpected charges will not push you negative. You can also set up low balance alerts through your bank's app or website, which send you a text or email when your balance drops below a certain amount.

Check your account balance before making large purchases, and keep track of pending transactions — money you have spent but that has not yet cleared from your account. Some banks show pending transactions in your app, which helps you see your real available balance rather than just the balance after cleared transactions.

If you regularly overdraft, it may be a sign that your income and expenses are not balanced. Consider meeting with a financial counselor at a nonprofit credit counseling agency, which offers free or low-cost guidance on budgeting and managing money. You can find a counselor through the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association (FCA).

What to do if your bank closes your account

If your account stays negative for 30 to 60 days without you depositing money to fix it, your bank may close the account. When this happens, you lose access to that account, and the bank may report the unpaid balance to a collection agency. You will also be listed in ChexSystems, a database that banks use to screen customers. Being listed in ChexSystems makes it harder to open a new account at other banks for several years.

If your account has been closed due to a negative balance, contact your bank when ready and ask what you need to do to settle the debt. Paying what you owe, even if it takes a few weeks, is much better than leaving it unpaid. Once the debt is settled, ask the bank in writing to remove you from ChexSystems. Some banks will do this if you have paid the full amount owed.

Frequently Asked Questions

Can the bank take money from my next paycheck to cover an overdraft?

Yes, if your paycheck is deposited directly into the same account that is overdrawn, the bank can use that money to cover the negative balance before you can spend it. This is called a setoff. The bank will use your deposit to pay back what you owe them first, then give you access to any remaining money.

Will overdrafting hurt my ability to get a loan later?

Overdrafts alone do not show up on your credit report, so they do not directly hurt your credit score. However, if the overdraft is sent to a collection agency and appears on your credit report, that will damage your score and make it harder to get a loan. Paying the overdraft quickly prevents this from happening.

What is the difference between overdraft fees and NSF fees?

An overdraft fee is charged when the bank covers a transaction that would make your balance negative. An NSF (non-sufficient funds) fee is charged when the bank declines a transaction because you do not have enough money. Some banks charge both; others charge only one. The amount is usually the same either way.

Can I dispute an overdraft fee?

You can ask your bank to reverse the fee, especially if it is your first overdraft or if you have been a customer for a long time. The bank is not required to reverse it, but many will as a courtesy. If the bank refuses, you can file a complaint with the Consumer Financial Protection Bureau (CFPB), though this does not may provide the fee will be reversed.

What happens if I ignore a negative balance for months?

Your bank will eventually close your account and send the unpaid balance to a collection agency. The collection agency will contact you to demand payment, and the debt will appear on your credit report for up to seven years. You may also be sued for the amount owed. It is much better to address the overdraft as soon as possible, even if you can only pay part of it.