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How to Recover from a Negative Bank Balance

Sarah Edwards | January 25, 2024

Sarah Edwards
Legal Expert
Sarah Edwards, BS

Sarah Harris is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: You can recover from a negative bank balance if you stop using the account, deposit money into the account ASAP, ask your bank to waive fees, and pay any merchants whose fees didn’t clear.

It's not unusual to have a negative bank balance. Usually, this happens by accident—your bank account may have been drafted for an item you weren't expecting, or an automatic deposit that is normally put into your account didn't go through. In most cases, if a bank account drifts into negative territory, it's for a small amount of money.

Unless you have an overdraft agreement with your bank, most banks will stop further transactions from going through via your debit card or withdrawals. They'll also prevent further draft activity and will refuse checks. This can reduce the chances of you incurring a significant amount of money that you owe to your bank to bring it into a positive balance.

In this article, we'll discuss the aspects of a negative bank balance and how to quickly recover from one.

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What is a negative bank balance?

A negative bank balance occurs whenever your bank account goes below $0. For example, you may write a check for $1,000 in rent, but your bank account may only have $800 in it. If the bank allows your check to be drafted to your account, you'll have a bank balance of -$200, plus any charges that you incur as a result of the overdraft of your account. To bring your account back into a place of good standing, you'll have to deposit enough to cover the overdraft of your account.

What happens if I have a negative bank balance in my account?

In most cases, people quickly eliminate their negative bank balance by simply depositing the amount needed to get their account back in good standing. However, there are certain consequences that your bank may impose, especially if you consistently have a negative bank balance, such as:

  • Overdraft fees.
  • Account closure.
  • Debt collection.

Now, let's take a moment to break down each of these consequences in detail.

You may incur overdraft fees

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. The typical overdraft fee charged by banks is between $30 and $35.

Thus, if you use your card for four different transactions of $15 that lead to an account balance of -$60, you may incur fees for as much as $140 on top of the $60 you overdrafted.

Let's take a look at an example.

Example: Laura has a checking account with Wells Fargo, and when she pays her rent at the beginning of the month, her account goes in the negative by a few dollars. Laura gets charged $35 each time her account is in the negative for one day. Wells Fargo can charge $35 per day for up to three days. This means that if Laura doesn't add funds to her account to make sure the balance is positive, she may be charged up to $105 for having a negative account balance for more than three days.


Account closure is possible

If you do nothing to resolve your overdrawn bank account for more than a given amount of time, your bank will probably close your account. You'll need to find another bank to handle your regular banking activities. The bank will report the closed account, which may result in potential difficulties in opening a new one with another bank.

Debt collection efforts may begin

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.

How to clear negative balance in bank account

If your account is overdrawn for any reason, you'll want to take action. Use these simple steps as a guideline. Here are four actions you should take if your account balance falls below $0:

  1. Stop using the account immediately.
  2. Deposit money into the account as soon as possible.
  3. Ask your bank to waive any fees.
  4. Pay any merchants whose fees didn't clear.

1. Stop using the account immediately

Once you realize that your account is overdrawn, stop using it. If you have automatic payments that are typically withdrawn from the account, put a hold on them. Don't use your debit card associated with the bank account for any purchases, and definitely don't write any checks.

2. Deposit money into the account as soon as possible

You don't want a negative balance hanging in your account for too long. Try to make arrangements to settle the amount due as quickly as you are able. This may be as simple as depositing your paycheck into the account or transferring money from another account that you hold.

3. Ask your bank to waive any fees

If you don't overdraft your account on a regular basis, your bank may be willing to waive the fees they have charged for overdrafted items. While they don't have to do this, it never hurts to ask — especially if you've been a long-term customer. To ask for waived fees, contact the customer service line on the back of your debit card.

4. Pay any merchants whose fees didn't clear

If a merchant or other business regularly drafts your account for services they provide, and their charges did not go through due to the overdraft, contact them immediately to arrange payment. Failure to do so can lead you to be in debt with them. Depending on the company and the type of services provided, they may cut off your access if they don't receive their payment. Common examples of this are telecommunications companies and utilities.

If my bank account is negative can I still use it?

If your bank account is negative, you can still use it, but you may incur overdraft fees. Every bank has unique overdraft fee rules and terms and conditions when it comes to a negative bank account balance.

Let’s look at some examples.

Chase Bank

If your account balance goes below zero by more than $50 due to a transaction, Chase will charge you an Overdraft Fee of $34 for each transaction. This fee is also known as an Insufficient Funds Fee. These fees are applied during their nightly processing and start with the first transaction that causes your account to be overdrawn by more than $50. However, there is a limit to how many times you can be charged in a day: Chase will only charge this fee for up to three transactions per business day, meaning the maximum you could be charged in one day is $102.

Wells Fargo

Wells Fargo lets you select overdraft services options. Services like this allow you to decide what happens when your account lacks sufficient funds for ATM or one-time debit card purchases. If you don't enroll, any purchase without enough funds gets declined without fees. However, if you choose to enroll, purchases can still go through even with insufficient funds, but you'll face a $35 overdraft fee per item.

Citi

Citi offers two services to help prevent your account from going into overdraft:

  • Safety Check: This service automatically transfers money from your linked Citibank savings account to your checking account if it goes into overdraft, covering the negative balance and any fees.
  • Checking Plus: This is a line of credit that, if you're approved, automatically covers your overdraft and fees by transferring funds from the credit line to your checking account. However, this doesn't apply to accounts in the Access Account Package.

Both services are designed to protect you from overdraft fees by ensuring your account always has enough funds. Note that some banks do not authorize overdrafts, so any transactions that would result in a negative bank account balance are automatically declined.

How do I avoid a negative bank balance in the future?

To avoid negative bank balances, stay on top of your finances. Make sure you have a monthly budget and stick with it. Set up a regular practice of checking your available balances on at least a weekly cycle. If your bank balance commonly dips under $100, you may want to do this daily.

Most banks offer a service where they notify you if your bank balance becomes low. If you sign up for this, you'll receive an email, text message, or automated phone call whenever your balance falls below a certain amount. This is a free service and can prevent you from facing overdraft fees if you take steps to ensure the balance doesn't drop any lower.

While overdraft programs may sound helpful by promising to cover charges when you don't have the money available, they are expensive. Each charge may incur a fee of up to $35. 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.

Can SoloSuit help me with a lawsuit for a negative balance from my bank?

If you're being sued by your bank for a negative balance, SoloSuit can help you respond in court. You can save yourself the stress and money of hiring an attorney and represent yourself instead. The first step to winning a debt collection lawsuit is to respond.

Learn more about how to respond to a debt collection lawsuit here:

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

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"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James


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