Negative Bank Account

What is a Negative Bank Account?

Having a negative balance in your bank account can be an alarming and stressful situation. But what exactly does it mean to have a negative bank account?
Simply put, a negative bank account occurs when more money is withdrawn from the account than what is available in the current balance. This results in the account being overdrawn and showing a negative balance.
While ending up with a negative account balance is never ideal, it’s a relatively common occurrence that most people will experience at some point in their financial lives. When handled responsibly, a negative bank account typically does not lead to long-term issues.

How Does a Bank Account Become Negative?

There are a few key ways that over-drafting and winding up with a negative balance can occur:


  • Forgetting your actual account balance – It’s easy to miscalculate or forget pending transactions and spend more than what’s in your account, especially if you rely on your checkbook rather than online banking.
  • Pending charges temporarily showing as available funds – Sometimes newly deposited funds that are still pending will temporarily inflate your available balance before the deposit clears. Spending based on this balance can lead to overdrafts.
  • Unauthorized or fraudulent withdrawals – Whether it’s a fraudulent debit card transaction or check forgery, unauthorized withdrawals can quickly take an account negative.
  • Processing delays or holds – Delays in deposit posting or holds on check deposits can cause hiccups between actual and available balances. This gap can lead to overdrafts.
  • Automated payments clearing – Forgotten automatic bill payments, subscriptions, or transfers can result in cleared withdrawals that exceed the account balance.
    While accidents happen, repeated overdrafts usually point to underlying money management issues that need to be addressed.

Read: 5 Debt Settlement Benefits Over Bankruptcy

What Happens When a Bank Account Goes Negative?

Banks have policies in place for handling negative account balances. There are a few common scenarios:

Overdraft Coverage and Fees

Many banks will pay overdraft transactions as a courtesy, up to the overdraft limit and for a fee. Overdraft fees often start around $30 per transaction. Allowing overdrafts avoids declined transactions but leads to rapidly mounting fees.

Overdraft Protection Through Linked Accounts

Banks may cover overdrafts by automatically transferring funds from linked savings accounts or lines of credit. There are usually smaller transfer fees instead of overdraft fees. This prevents declined transactions without the high fees.

Declined Transactions

If there is no overdraft coverage in place, transactions that would put the account negative are simply declined. However, banks still often charge non-sufficient funds (NSF) fees of around $30 when they have to decline the transaction. Either way, banks will expect negative balances to be repaid promptly along with any fees. Otherwise, further action may be taken on the account.

Consequences of Prolonged Negative Balances

Leaving a negative balance unresolved can result in more serious consequences:


  • Repeated overdraft and NSF fees rapidly accumulate, compounding the amount owed
  • Banks may close accounts with unpaid negatives balances after a period of time
  • Closed accounts due to negatives balances make it harder to open an account elsewhere
  • Unpaid balances can get sent to collections, damaging credit scores and history
  • Legal action may eventually be taken to garnish wages or seize assets to repay debts

Banks don’t take prolonged negative balances lightly. It’s crucial to address them quickly before the situation spirals.
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Fixing and Managing a Negative Bank Account

If you do end up with an overdrawn bank account, here are some tips for getting back on track:


  • Stop spending from the account immediately – Prevent any further withdrawals to avoid additional overdrafts.
  • Deposit funds to cover the negative amount – Including any overdraft or NSF fees charged by the bank.
  • Review account history – Look for pending transactions, holds, or debts you may have forgotten about.
  • Reevaluate money management – Take it as a sign to overhaul spending and budgeting habits to avoid repeats.
  • Consider overdraft protection – Link to accounts with funds or lines of credit to avoid declined transactions and heavy fees.
  • Build an account buffer – Have a few hundred dollars as a cushion to absorb accidental overdrafts when possible.

With mindful account monitoring and spending habits, as well as safety nets like overdraft protection, negative balances can often be avoided entirely. But even if one occurs, addressing it promptly minimizes any lasting impacts.

The Takeaway

Having a negative bank account balance can happen unexpectedly. But it doesn’t have to be catastrophic with the right approach. Being aware of what causes negative balances, how to address them properly, and taking preventative measures will keep your accounts in the positive

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