If your bank account goes negative, you’ll likely face overdraft fees and may be asked to repay the amount you spent over your available balance. Many people accidentally end up with a negative balance when an unexpected bill hits or when spending isn’t carefully tracked.
If you’re dealing with a negative balance, you might be looking for a quick way to cover the shortfall. It’s not unusual to need a little help getting back on track, especially when money is tight before your next paycheck. The goal is simply to stabilize your account and avoid extra fees while you sort things out.
Key Takeaways
- If your bank account goes negative, it means you’ve spent more money than was available in your account, which can lead to overdraft fees, declined payments, and pressure to quickly repay the negative balance before additional consequences occur.
- A negative bank balance can trigger overdraft or non-sufficient funds (NSF) fees, and repeated overdrafts may eventually result in account closure or collections activity if the balance remains unpaid.
- Leaving a negative balance unresolved can indirectly hurt your credit by causing missed payments, collection accounts, or banking history issues reported through ChexSystems, making it harder to open new accounts in the future.
- The best way to prevent a negative bank account is to monitor your balance regularly, enable low-balance alerts, consider overdraft protection, and avoid automatic payments when funds are low.
What Does A Negative Bank Balance Mean?
A negative bank balance means you have overdrafted, or spent more money than you had available in your bank account. For example, if you have $45 in your bank account and make a $50 purchase, the transaction may go through, but it will result in a negative bank balance.
Suppose you overextend your finances and get a negative bank account balance, also known as going red. In that case, you will likely have to pay a bank fee. Depending on the debit card transaction, you may have to pay multiple bank fees.
Overdraft Fees
An overdraft occurs when you spend more money than you have available in your checking account. Most financial institutions charge an overdraft fee for a negative bank balance. The average cost can range anywhere from $25 to $35.
Your bank may cover the cost of your overdraft item. This means you will have to pay the overdraft fee and then the amount of your negative balance. Suppose you have $100 in your checking account and spend $200. If the overdraft fee is $25, you must pay the bank $125.
Non-Sufficient Funds (NSF)
Don’t have enough money in your checking account to cover the cost of transactions? A bank will charge a non-sufficient funds (NSF) fee, also called an insufficient funds fee. The cost of an NSF fee is typically less than an overdraft fee. However, you will have to pay an NSF fee for every expense that you make while your checking account has a negative balance.
The difference between overdraft and non-sufficient funds fees is overdraft protection. If your bank does not cover the cost of a transaction that results in a negative balance, you will need to pay an NSF fee.
What Are The Consequences of A Negative Balance?
The consequences of a negative bank balance include fees or service charges, a negative impact on your credit, and potentially account closure if the account stays negative for too long. If you have a negative bank account, the financial institution will issue an overdraft or NSF fees. But what if you cannot afford to recover a negative balance at the moment? The inability to pay overdraft fees or deposit money into a negative bank account can result in severe consequences that further disrupt your life.
Bank Account Closure
If you maintain a negative bank balance, the bank may close your checking or savings account. There are various reasons why a bank may perform an involuntary closure. Having multiple overdrafts or bounced checks, maintaining a negative bank balance, and making too many transfers can result in a closed checking account.
Credit Bureau Report
While you may be able to open a bank account with bad credit, qualifying is more complicated if you previously received an involuntary closure. If a bank closed your bank account due to a negative bank account, you might have issues opening a checking account in the future.
The bank can report your negative account balance to ChexSystems. ChexSystems is a bank reporting bureau that monitors bank accounts. A bank may deny your new checking or savings account application based on previous debit card transactions and overdrawn accounts.
Decreased Credit Score
Banks cannot report your information to the three credit bureaus because they are not creditors. However, a negative bank account may still affect your credit score. Payment history is the most important factor for credit score calculation, as it counts for 35% of your score. If a payment declines due to insufficient funds, that payment will be late. Late payments can quickly decrease your credit and make it harder for you to qualify for housing or loans.
Bank Account Be Sent to Collections
Suppose you have no money to pay an overdrawn account. In that case, the bank will close your checking or savings account and potentially work with a debt collection agency. The debt collector will attempt to recoup the unpaid debt by calling you and sending debt collection letters. If you fail to pay outstanding bank balances after your debt is sent to collections, the bank can take legal action.
Negative accounts count as unpaid debts, so a bank can take legal action against you. The bank could use legal remedies against you to get enough money to cover the unpaid bank balance. Banks and credit card companies can garnish wages in court. Wage garnishment is a legal procedure that means withholding your income to cover outstanding debt, such as an overdrawn account.
Steps To Fix A Bank Account in The Negative
If you have a negative account, the best step is to pay the outstanding debt to regain a positive account. If you do not have enough money to fix a negative account, you can take steps to obtain cash quickly.
- Sell Items — If you need money quickly, you can hold a yard sale or sign up for a marketing platform, such as eBay, to sell your personal items online.
- Get a Second Job — Picking up extra work through a side hustle can help you get cash for negative accounts.
- Apply for a Loan — You can obtain money in as little as one business day.
- Exchange Your Coins — If you have a jar of coins you have been saving, you can exchange those coins for cash at a bank or coin-counting machine.
How To Prevent a Negative Bank Account Balance and Overdraft Fees
As you can see, there are various negative ramifications if your bank account goes negative. The good news is that you can take steps to prevent making your balance negative and paying overdraft fees.
Get a Checking Account With No Overdraft Fees
While most banks charge fees for overdrafts, there are account options that do not have overdraft fees. Suppose you accidentally make a purchase that costs more than your available balance. In that case, you will not have to pay a fine for overdrawing your checking or savings account. This type of account can help you save money on additional fees.
Sign Up for Alerts
It’s always a good idea to check your bank account regularly to ensure you have enough money to cover expenses and bills. But if you prefer, you can simply sign up to receive low-balance alerts! Many banks offer mobile, and email address alerts when your account balance dips below a certain amount. You can set your preferred low balance alert amount and delivery method.
Sign Up for Overdraft Protection
Many banks allow customers to opt in to an overdraft protection program. An overdraft program will enable you to link two accounts to prevent overdrafts. Suppose you spend more money than you have available. In that case, money from your linked account will be used to maintain a positive balance. Suppose you link your checking and savings account. If your transaction exceeds your primary account balance by $50, your linked savings account will transfer the necessary amount.
Disable Automatic Payments
It may be good to disable automatic payments to ensure you have enough money in your account to cover bills. Paying your bills manually online can help you avoid overdraft fees and a negative balance.
Get the Fee Waived
If you have maintained your bank account well enough, you may be able to get the first overdraft fee waived. Speak with a bank teller and mention how you have upheld a positive account with no issues. There is no guarantee that the fee will be waived, but it’s always good to ask if you have been a valuable customer.
FAQ
How Do I Keep My Bank Account From Being in The Negative?
To avoid overdrawing your checking account, stay on top of your balance. Check it regularly, track your purchases and pending payments, and sign up for low-balance or transaction alerts so you’re not caught off guard.
Can a Negative Bank Balance Hurt Your Credit Score?
Yes, it can, but usually only if you don’t fix it. A negative bank balance by itself doesn’t automatically impact your credit score. However, if you leave it unpaid, your bank could close your account and send the debt to collections. Once a collection account is reported to the credit bureaus, it can lower your credit score and stay on your credit report for years.
Can You Get in Trouble for Overdrawing Your Checking Account?
You won’t get arrested or face criminal charges for overdrawing your checking account, but it can still cause problems. Banks typically charge overdraft fees, and if the negative balance isn’t repaid, they may close your account. In some cases, the unpaid amount can be sent to collections, which could make it harder to open a new bank account and potentially affect your credit.
What Should You Do With A Bank Account In The Negative?
If your account is overdrawn, act fast by depositing or transferring money to bring the balance back to positive and limit extra fees. Avoid using the account until it’s fixed, since more transactions can add charges. You can also contact your bank and ask if they’ll waive the overdraft fee, especially if overdrafts don’t happen often for you. Taking quick action helps you control costs and get your account back in good standing.
References:
Can an Overdrawn Bank Account Be Sent to Collections? | Credit.com
Is Your Bank Account in the Red? Here’s What to Do Now | U.S. News
What could happen if you have a negative balance? | Self Inc.
