Negative Bank Balance: What Happens to Your Account Next?

Some banks even offer debit card overdraft coverage to help eligible transactions go through at the bank’s discretion. However, this depends on your bank’s policies and the specific type of account you have. A negative bank balance occurs whenever your bank account goes below $0.

  • In other words, the balance in your bank account has dropped below $0.
  • An overdraft protection plan is an overdraft service provided by your bank that ensures that the transaction goes through.
  • Our technical teams are aware and working to resolve this issue as quickly as they can,” the bank’s customer assistance account responded.
  • This personal finance option is usually available to people who have yet to have their accounts overdrawn repeatedly.
  • An arranged overdraft is unlikely to have a major impact on your credit score as long as you don’t go beyond your overdraft limit or have payments refused.

Your bank can close your account and pursue legal means of recovering the money you owe. Here are some frequently asked questions on how to deal with negative balances on your account. You may not want to give up after the first try; consider calling back at another time and talking to someone else to see if you can get overdraft fees back. It could also be an ATM transaction, taking cash out at a local bank, or making a debit card transaction. The more types of transactions you make, the greater the chance of an overdraft. We think it’s important for you to understand how we make money.

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When all else fails, you may be sent to a third-party collection agency. And in some cases, it may be documented on your credit history, which will affect your credit score and any future attempts to get credit. A negative account balance can have a variety of consequences, none of them good. A negative balance on a debit card means the balance of the account linked to your debit card is negative.

If a large negative balance exists—say, $1,000 or more—the cardholder can request a refund from the credit card company via check or direct deposit. Though it often makes more sense for larger balances, having a larger negative balance is not required to request a refund. Some credit cards provide cardholders with bonus rewards or statement credits based on select purchases.

  • By not signing up for the overdraft program, your bank must refuse charges that come through your account, eliminating the potential for significant negative balances.
  • HDFC Bank, for example, doesn’t charge any fee if the customer closes the account within 14 days.
  • However, your bank might also offer this coverage automatically on other types of transactions.
  • The notice should tell you how to rectify your account and what happens if you fail to repay it.
  • Some banks provide this service for free, while others charge a fee.

When you apply for new checking or savings accounts, banks may look at your record. If they notice an involuntary closure on your bank account history, they may decide not to open the new account you desire. Or they may allow you to open an account accrual accounting while imposing restrictions and hefty fees. As we mentioned, your balance becomes negative when you withdraw more than you have in your checking account. Unless you have overdraft protection, the check you wrote will bounce or get returned.

Another efficient method of preventing a negative bank account is by cutting expenses. Look for ways to cut costs, such as cutting back on eating out or terminating pointless subscriptions. You can then have more money available to put toward your financial objectives. You can prevent a negative balance in your bank account by setting financial goals. You may stay motivated to save and make sensible financial decisions by having clear goals in mind. Having a specific objective will help you keep focused, whether you are trying to pay off debt or save for a down payment on a home.

Or you might deposit a check and then make a payment right away, before the funds are available in your account. If your account is overdrawn, consider getting a line of credit from your bank or credit union. These types of lenders may be able to offer you a longer-term loan so that you can have a positive account balance.

The costs of a negative bank account and how to avoid them? ›

And if you’ve agreed to your bank’s overdraft coverage, the bank can also charge you a fee for each ATM withdrawal or debit card payment that results in a negative account. If this keeps happening, you may have to pay a significant amount in overdraft fees. You may also owe other fees if you don’t correct the negative balance right away. 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. In that case, money from your linked account will be used to maintain a positive balance.

If the negative balance in your bank account persists, your bank can and will probably close your account. The bank may also close your account if it repeatedly goes negative. However, to know the bank’s exact actions, you should visit the bank or read the disclosure you received after opening the account. HDFC Bank, for example, doesn’t charge any fee if the customer closes the account within 14 days. If the account is closed between 15 days and six months, it charges ₹500, and ₹250 if it’s closed between six months and one year, according to its website.

But if you already have a negative account balance, this option may not be available immediately. If the bank charged you the NSF or overdraft fee, consider calling their customer care service line and request a waiver. Most financial institutions will waive the fee, especially if your account is incurring a negative balance for the first time. A negative balance is an indicator that an incorrect accounting transaction may have been entered into an account, and should be investigated.

Ask Your Bank to Waive Fees

They might also offer a line of credit that provides overdraft protection. 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. 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.

Your bank will likely begin collections activity against you once they have closed your account. This can result in lots of phone calls and letters from your bank attempting to recover the amount you owe them. If the amount is significant, you may be the subject of a lawsuit seeking to reclaim the amount owed. Take a close look at your bank statements to find out what triggered the negative balance. Once you hone in on the root cause, you’ll be able to prevent this issue down the road. Keeping tabs on your finances is easier said than done, especially if you lead a busy life and have a lot on your plate.

Consider overdraft protection

Overdraft protection may be provided automatically by your bank if an ATM withdrawal or debit card activity reduces your balance below $0. If you have overdraft protection, it may cover a withdrawal or transaction. A bank may also protect your account by transferring funds from a connected account, such as a savings account, to your overdrawn checking account. The ability to use your debit card when your account is negative depends on whether or not you have overdraft protection.

Budgeting basics and a few safeguards might go a long way toward reducing the likelihood of accruing a negative bank balance and any accompanying consequences. In the event of an overdrawn account, it helps to take swift, informed action to mitigate further financial damage. Speaking to your bank about their overdrawn account policies can help keep you informed and better prepared for an emergency. Banks are entitled to charge an overdraft fee for each transaction that results in a negative balance. These can add up quickly, especially if you’re using your debit card for multiple small transactions in a short span of time.

What to do if your bank account balance is negative

To ask for waived fees, contact the customer service line on the back of your debit card. But fortunately, it’s a fairly simple issue to resolve and prevent down the road. As long as you take advantage of technology and stay mindful of your spending, this shouldn’t be a regular occurrence.

Experts generally recommend that an emergency fund have enough money to cover three to six months of living expenses. When your bank account is approaching a negative balance, you can draw on your emergency fund. The bank may cover the transaction and give you an overdraft fee in the best-case situation. The bank is effectively charging you a fee for a temporary “loan” to cover the transaction.

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