Can You Withdraw Money If You Have a Negative Balance?

A negative balance in an account means the amount of money available is less than zero, indicating the account holder owes money to the financial institution. This occurs when transactions or withdrawals exceed the funds present.

Understanding a Negative Balance

A negative balance in a checking or savings account, often called an overdraft, occurs when an individual spends or withdraws more money than is available. This can happen due to mismanaging the balance, initiating transactions like writing a check, making an ATM withdrawal, or using a debit card for a purchase that exceeds current funds. Scheduled automatic payments, unexpected bank fees, or even unauthorized activity can also deplete an account past a zero balance. In such instances, the bank may cover the transaction, creating a debt for the account holder.

Conversely, a negative balance on a credit card statement is typically favorable. It signifies the credit card company owes money to the cardholder. This can happen if a cardholder overpays their bill, receives a refund for a returned item, or earns statement credits that exceed their outstanding balance. This differs from an overdrawn bank account, where the cardholder incurs debt.

Implications of Attempting a Withdrawal

Attempting to withdraw money or make a purchase from a checking or savings account with a negative balance typically results in a declined transaction. Most financial institutions prevent cash withdrawals or debit card purchases that would deepen an existing negative balance, as there are insufficient funds. This ensures the bank does not extend further credit without explicit arrangements.

However, the outcome can vary with overdraft protection. With overdraft coverage, which often requires explicit opt-in for ATM and debit card transactions, the bank may allow the transaction to proceed even if it causes the account to go further into the negative. An overdraft fee, typically ranging from $34 to $35 per occurrence, will be assessed.

If overdraft protection is not in place, or if its limits have been exhausted, the transaction will be declined, and the bank may charge a Non-Sufficient Funds (NSF) fee, often comparable to an overdraft fee. Similarly, if a check is written on an account with insufficient funds, it may “bounce,” leading to an NSF fee for the account holder and potentially a returned check fee for the payee.

Managing a Negative Balance

Promptly addressing a negative bank balance is crucial to avoid escalating fees and further financial complications. First, stop using the overdrawn account to prevent additional charges. Then, deposit enough funds to cover the negative balance and any accrued fees to bring the account back into positive standing. Contacting the bank may also be beneficial, as some institutions might waive fees, especially for a first-time occurrence.

If a negative balance is not resolved in a timely manner, banks typically take further action. They may impose additional fees, such as extended overdraft fees, if the account remains negative for an extended period. If the deficit is not settled, the bank may close the account. If an account is closed with an outstanding negative balance, the bank might send the debt to a collections agency.

While a negative bank account balance does not directly impact a consumer’s credit score, an unpaid debt sent to collections can. Unresolved debts reported by collection agencies can appear on credit reports, lowering credit scores. Furthermore, a history of unpaid overdrafts or involuntarily closed accounts is often reported to specialized consumer reporting agencies like ChexSystems. A negative report with ChexSystems can hinder opening new bank accounts for up to five years.