How to Recover from a Negative Bank Balance (2024)

Sarah Edwards | October 19, 2022

Summary: Here is SoloSuit's guide to negative bank balances, their possible effects, and how to avoid going under.

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.

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: Hannah 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. Hannah 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 Hannah 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.

What should I do if my account is overdrawn?

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:

Stop using the account immediately.
Deposit money into the account as soons as possible.
Ask your bank to waive any fees.
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.

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:

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As a seasoned expert in financial matters and debt management, I find it crucial to delve into the intricacies of negative bank balances, their repercussions, and strategies for recovery. The article by Sarah Edwards, dated October 19, 2022, published on SoloSuit, comprehensively addresses these aspects, offering valuable insights into the complexities of dealing with a negative bank balance.

Negative Bank Balance Overview: A negative bank balance occurs when an individual's bank account falls below $0. This can happen due to various reasons, such as unexpected drafts or failed automatic deposits. The article emphasizes that unless there's an overdraft agreement in place, most banks will block further transactions, withdrawals, and checks to prevent additional debt accumulation.

Consequences of a Negative Bank Balance: Edwards details the potential consequences of having a negative bank balance, including overdraft fees, account closure, and debt collection efforts. Overdraft fees, typically ranging from $30 to $35 per transaction, can accumulate rapidly, leading to financial strain. Prolonged neglect of an overdrawn account may result in the bank closing it, impacting the individual's ability to conduct regular banking activities. Debt collection efforts, including calls and letters, may follow, potentially escalating to legal action.

Addressing Overdraft Fees: The article provides an illustrative example involving Hannah, a Wells Fargo customer, to emphasize the financial impact of overdraft fees. It advises individuals to promptly deposit funds to cover the overdraft, preventing additional charges and potential account closure.

Steps to Take if Your Account is Overdrawn: To recover from a negative bank balance, the article outlines four key actions:

Stop using the account immediately: Cease any transactions and automatic payments associated with the overdrawn account.
Deposit money promptly: Settle the negative balance as quickly as possible through deposits or transfers.
Request fee waivers: Contact the bank's customer service to inquire about waiving overdraft fees, especially for long-term customers.
Pay outstanding fees to merchants: If any fees to merchants didn't clear due to the overdraft, arrange payment promptly to avoid further issues.

Preventing Future Negative Balances: Edwards recommends proactive financial management to avoid negative bank balances. This includes maintaining a monthly budget, regularly checking account balances, and signing up for bank notifications about low balances. The article discourages relying on overdraft programs due to their associated high fees.

SoloSuit's Role in Debt Collection Lawsuits: The article concludes by introducing SoloSuit as a resource for individuals facing lawsuits over negative bank balances. SoloSuit provides a step-by-step web app to help users respond to debt collection lawsuits, potentially saving them the cost and stress of hiring an attorney.

In essence, this comprehensive guide provides practical advice and insights for individuals dealing with negative bank balances, offering a strategic approach to recovery and prevention.