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Negative Bank Account Balance: What is It and What It Does to Your Account?

Have you been in a situation where you had $500 in your account and withdrew $600? Or that time you wrote a check for $1200 and found later that you had only $1000? How could you do that? Well, that extra $100 from the ATM or an extra $200 for your bank check was paid by your bank. This is an overdraft; you now have a negative bank account balance. 

This sort of situation is common among people using a bank account. Sometimes you lose track of the funds in your account or need money for emergencies. For these purposes, banks have coverages to cover your extra expense and save you from inconvenience and embarrassment. After that, the financial institution puts your account in a deficit, which you must repay. This is called an overdraft fee, sometimes in interest, which must be paid back to the bank. In this article, we learn about the negative bank account in detail. Let’s dive in. 

What is a Negative Bank Account?

negative bank account

A negative bank account typically happens when your bank account falls below 0. In other words, when you have exhausted your bank account funds and still withdraw money, the bank pays the extra amount for you, and the account turns negative. You have to return the money, sometimes with interest. This is called an overdraft fee. 

Banks do not automatically provide Overdrafts that would allow you to cover your overdrawing. You have to apply for coverage of an Overdraft. Some banks do not have overdraft coverage at all. Some banks provide automatic overdraft coverage in certain accounts depending on their policies, terms, and conditions. In short, Overdraft fees are levied when the bank authorizes a payment transfer when there isn’t sufficient balance in your account. 

Overdraft fees are charged when you put money into your account from where the fee is deducted. This is also referred to as overdraft rectification. The bank allows you a stipulated time to rectify your overdraft. If you do not put funds into your account and rectify your overdraft, the bank account will be closed, and your affairs will be outsourced to a debt collection agency. 

Cost of Overdrafts

The standard fee for an overdraft is about $35 for a bank account negative. But different banks have different fees. Here’s a comprehensive study 

Name of the Bank Overdraft Fees ($)
Bank of America 35
Capital One  34
Chase  34
Citi 34
Discover  0 (payment is declined if there aren’t enough funds)
US Bank 36

Reasons for Having a Negative Bank Account 

If the thought “ my bank account is overdrawn and I have no money “ has ever crossed your mind, then you must know it’s pretty standard. According to Forbes, 43% of vulnerable families have incurred a negative balance account of 9.6 on average. If the bank has an average of $24.38 in overdraft fees, the households paid about $234 on average in overdraft fees. Here are some possible reasons for having a negative bank account. 

Miscalculation of Bank Funds

A negative bank balance can occur if you lose track of your banking funds and forget which account has how much money. This miscalculation often leads to situations where you draw out more money from the ATM or give out a check with money in your account. The bank, in the meantime, pays the deficit for you, but your account is denigrated to a negative balance. The bank charges the deficit with overdraft fees for a negative bank account balance. 

Sometimes, the account holder can be an irresponsible spender and overdraw their account on purpose. Banks use this to impose predatory overdraft policies and fees. In 2019, American Banks collected overdraft fees of $11 billion, according to a report submitted by CRL

Automatic Payments

Since our life has become more internet-centric, we have resorted to online payments. This facility has also been made convenient through an automatic payment mechanism where retailers or merchants, from streaming platforms to credit card companies, automatically debit the money from the account. The customers are not in the loop while making payments. Thus, they need to catch up. Sometimes these automatic payments occur even when the account has insufficient balance creating this prevalence of overdrawn accounts. 

What Happens When You Have a Negative Bank Account?

What Happens When You Have a Negative Bank Account?

If you were asking what happens if your bank account goes negative, we have compiled a list of the possible consequences that you could face. Read them here:

Overdraft Fees

There was a time when my bank account was negative $1000. Speaking of experience, you will be charged an overdraft fee. The standard fee for an overdraft account is $24-$35, levied on account holders after they rectify their overdraft account. However, not all banks have overdraft fees. They decline your payment outright. Other banks charge something called a Non-sufficient fee. The fee is charged when you have no or below-par bank balance. 

Account Closure

Your account will close down. If you don’t rectify your overdraft, the account will be closed due to inactivity or restriction from financial authorities. The bank will outsource the overdraft fee to the debt collection agency. 

Bad Impact on Credit Score

A negative bank balance impacts your credit score to a great extent. Bank flags negative balance accounts, which stay in their archive and records for over seven years if your situation doesn’t improve. 

As if that isn’t enough, when credit card companies check your banking history, the banks will send your records of lapse overdrafts to the credit card company. This failure to repay impacts and lowers your credit score. It also decreases your chances of getting a credit card or getting approved for any loan in the future. 

Overdraft vs. Non-Sufficient Fee

If you were wondering how much can I overdraft my checking account, this section will answer your query. Overdraft fees are paid if you have a negative account balance, and the bank has paid for your deficit or any of your transactions. They are incurred when your account has less money than the amount of money you’re trying to transact. You have to rectify your negative balance, and the bank charges a fee to cover your expenses. 

So, what will happen if your bank account goes negative? Your credit score will be impacted in an unseemly way, preventing you from accessing economic benefits or grants, such as loans, credit, etc., in the future.

A non-sufficient fee is the charge placed on the bank account holder if the amount dips below the recommended level by the bank policy. Some banks will only allow you to overdraft your account if your bank account has a high balance. So, it depends on bank policy. 

How to Avoid Overdraft Fees?

Now that we have discussed what happens if your bank account goes negative, let’s discuss how to avoid the situation. 

  1. You must rectify your negative balance as soon as possible. Rectifying your negative balance means depositing money to cover the balance above zero, your expense, and the deficit. 
  2. Many banks offer overdraft protection as an additional facility, not by default. So follow the rules and regulations to opt for overdraft protection. 
  3. You could link your savings account to your credit account, checking account, or credit card. The money from your overdraft can be deducted from there without you paying any fees. Now, you might ask, “how many savings accounts should I have?” There are no limitations or the appropriate number for that. 
  4. Keep track of your bank balance across your accounts. Subscribe or open an account in a bank where they send an alert if the account is below the required balance. 

Frequently Asked Questions (FAQs)

Q1. How long can a bank account be negative?

The bank can be negative if you haven’t enough balance to cover up your deficit. You must put in the total expense and overdraft fees for second-chance bank accounts within 30 to 60 days depending on the regulations and guidelines predefined by the banks.

Q2. How do you clear a negative bank account?

The negative bank account can be cleared if you put the entire money you have spent, along with the overdraft money you put in. For example, if you wish to withdraw the amount of $600 but you have $500 in your account, you must pay $600 plus the overdraft fee. Only then will you have rectified your overdraft account?

Q3. Does a negative bank account affect credit?

What if you’re wondering what would happen if, say, my bank account is negative $1000. Well, a negative bank balance impacts your credit score to a great extent. Banks flag negative balance accounts, and the information stays in their archive for over seven years, depending on your situation.


Overdraft protection has many benefits. It can save money on a low income and help save face during financial emergencies. Having said that, overdraft accounts can become a bane if using them develops into a habit. 

When used recklessly, overdraft fees often pile up and become burdensome, and repeated usage can indirectly harm your credit score. Banks tend to draw you into getting overdraft accounts, which become predatory after a point. Therefore, use the protection wisely. It is advisable to not overuse it or use it frequently. 

Author Profile

David Garcia
David Garcia
David Garcia is a nationally-recognized consumer and money-saving expert who helps people make smart decisions with their money. He has been featured on NBC’s Today Show, Good Morning America, ABC News, and CNBC as well as in The New York Times & other media outlets. With more than 13 years of experience in the personal finance space, David is an experienced writer and researcher. He has written for major publications where he provides readers with actionable advice to save money on groceries, insurance, and more. With his work for various publications, David is an active contributor to the Credit Card Insider blog where he shares insights into credit cards such as rewards programs and interest rates.

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