What Happens if I Have a Negative Balance on My Debit Card?

Debit Card

You overdraw the account when you spend more than you have in your checking account. After overdrawing your account, what happens next? What happens if you have a negative balance on your debit card? Do you keep spending or do your bank shut your account or report you to credit bureaus?

If you have a negative balance on your debit card, your bank will slap you with an overdraft fee of $35. If you fail to pay the overdraft fee, your bank can close your account or take legal action against you.

Having a negative account on your account can hurt your finances, especially if you fail to quickly bring it up to the positive. Paying charges on the overdraft amount can shake you financially. And if you fail to, your account might be closed. In this post, I have highlighted what happens if you have a negative balance on your debit card.

Why Is My Available Balance Negative on My Debit Card?

What Happens if I Have a Negative Balance on My Debit Card?

Before we proceed further, let’s look at what a debit card is.

A debit card is a triangular payment card that allows you to make secure and convenient purchases online and in person by withdrawing money directly from your checking account. Unlike a credit card, you aren’t borrowing from a line of credit; instead, you are using what you have in your checking account.

Can I Still Use My Debit Card With a Negative Bank Balance?

Banks will let you use your debit card even when your account is overdrawn, provided you have registered for their overdraft protection program. It is, however, advisable that you steer clear of the overdraft program. This is because of the cons associated with having a negative account balance.

For instance, you get charged a fee ($31 for smaller banks and $35 for bigger banks) each time you overdraw your account. Eventually, this will raise the negative bank balance, increasing your debt.

It’s important you understand that if your bank account stays negative for a long time, your bank can close it. To save their money, banks can call in collection firms that can list you with credit bureaus. You certainly don’t want that to happen, as it can adversely affect your credit score.

In addition, based on state laws, it is illegal for a person to bounce a payment or write a bad check intentionally. Initiating payments with negative accounts purposely is outright fraud. Banks have the right (by law) to charge you with a crime if your check is rejected due to insufficient funds.

What Is the Result of Having a Negative Balance on Your Debit Card?

If you have a negative balance on your credit card, your bank will charge you an overdraft fee. Also, if you accept these charges, the bank may charge you a fee for every debit card payment or ATM transaction that takes your account balance below $0. The typical overdraft charge is $35 for most banks, while some are $34.

Is your bank account negative? Is so your banks may hit you with many sanctions. These include: account closure, an overdraft fee, or a credit impact, as stated below:

  1. Overdraft Fee

If you initiate a payment or a transaction that results in a negative balance in your bank account, your bank charges you an overdraft fee. Plus, if you acknowledge these charges, the bank will probably charge you per debit card payment or ATM transaction that rendered your account balance negative.

At the time, the bank will charge you multiple overdraft fees for all transactions that take place when you are out of funds. After your bank balance drops below $0, your bank requires you to deposit funds into the account to bring up the balance.

  1. Account Closure

If the negative balance in your bank account remains that way, your bank can and will likely shut your account. The bank may also choose to shut your account if it goes below $0 frequently. But, to know your bank’s next move, you should visit the bank and look at the disclosure that you got after opening the account.

Immediately after the account is shut, your bank alerts a checking account firm that stores information regarding your account for as long as seven years. As such, shutting your account doesn’t really mean that your debt vanishes into thin air.

  1. Credit effect and debt collection

Aside from shutting your account, banks can report you to their reporting bureaus, which are just like credit bureaus. As soon as your name is on these bureau’s lists, it becomes difficult for you to open a bank account from any other bank in your country or even abroad.

Alternatively, you may be offered the chance to open an account with extra charges and other limitations. For instance, you may be compelled to have a certain non-withdrawable balance in your account.

Banks can as well leverage the services of a debt collection firm to collect the overdraft amount from you. These firms adopt many collection means and may even report you to credit bureaus, which can negatively affect your score. Settling overdraft fees is necessary if you don’t want to find yourself in situations where you might have to try fixing your credit yourself.

What Time Does Daily Withdrawal Limit Reset?

How Long Can Your Bank Account Be Negative?

The amount of time it takes to shut a negative bank account isn’t the same for each bank. The timeframe depends on the bank’s policy and other factors like the size of the negative balance and the customer’s banking history. But, most banks will take between 30 days to 4 months to shut negative accounts.

What Happens if I Don’t Pay My Negative Bank Balance?

Should you fail to pay your negative bank balance, the bank will shut the account after some time and report it to the credit agencies. This will be added to your credit report as unsettled debts and will bring down your credit score. Also, you will not be allowed to create an account with the bank.

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