What happens when you overdraft a savings account
When you withdraw more money than you have in your savings account, the bank covers the difference and your balance goes negative. This is called an overdraft. The bank is lending you that money, and they charge you a fee for doing it — usually $25 to $35 per overdraft, though some banks charge more. You owe the bank both the negative balance and the fee.
Savings accounts are not designed to go negative the way checking accounts sometimes do. Many banks will simply decline the withdrawal or transfer if there is not enough money. Others will allow the overdraft but charge you immediately. A few will let the negative balance sit for a day or two before charging, giving you time to deposit money and avoid the fee entirely.
The key difference from a checking account overdraft is that savings accounts typically have withdrawal limits set by federal law (six per month used to be the standard, though this has loosened). Going negative does not change that limit, but it does mean you are paying interest on borrowed money while your account sits below zero.
Key Takeaways
- Most banks charge $25 to $35 when your savings account goes negative, and you owe that fee plus the negative balance itself.
- Some banks decline the transaction if funds are not available; others allow the overdraft and charge you after the fact.
- Depositing money before the bank's end-of-day processing can sometimes prevent the fee from posting, but timing varies by bank.
- If your account stays negative for more than 30 days, the bank may close it and report you to ChexSystems, making it harder to open accounts elsewhere.
- Overdraft protection linked to a credit card or line of credit can prevent savings account overdrafts, but it charges interest instead of a flat fee.
How banks decide whether to allow the overdraft
Banks have different policies about whether they will even let your savings account go negative. Some use a hard stop — the transaction is simply declined at the point of sale or during the transfer. You find out immediately that you do not have the money, and no fee is charged.
Other banks use overdraft coverage, which means they will process the transaction even if your balance is insufficient, then charge you a fee after the fact. This is more common at larger banks. The fee posts within one to three business days, depending on the bank's processing schedule.
A third group offers overdraft protection, a service you can opt into that links your savings account to a checking account, credit card, or line of credit. If you overdraft the savings account, the bank automatically transfers money from the linked account to cover it. This avoids the overdraft fee but may charge interest or a transfer fee instead, depending on what account is linked.
When the fee posts and how to avoid it
The timing of when an overdraft fee posts matters because you have a small window to deposit money and prevent it. Most banks process transactions and post fees at the end of the business day, usually between 8 p.m. and midnight Eastern time. If you deposit money before that cutoff, the bank may not charge the fee because your balance will no longer be negative when they process the overdraft.
However, this depends entirely on your bank's processing schedule. Some banks process overdrafts in the morning, some in the evening, and some in batches throughout the day. Call your bank or check your account settings to find out when they post overdraft fees. If you know you are going to overdraft, depositing money as early as possible in the day gives you the best chance of avoiding the fee.
If the fee has already posted, you can sometimes ask the bank to reverse it — especially if it is your first overdraft or if you deposit money immediately after. Banks have discretion to waive fees, and many will do so once per year or if you have been a customer for a long time. There is no harm in asking, but do not count on it.
What happens if your account stays negative
If you do not deposit money to bring your savings account back above zero, the negative balance will grow. The bank will charge another overdraft fee after a certain number of days — usually five to seven days after the first fee. Some banks charge a fee every few days until the account is positive again, which can add up quickly.
If your account stays negative for 30 days or longer, most banks will close it. When they close an account due to a negative balance, they report it to ChexSystems, a banking history database. This report stays on your record for five years and makes it very difficult to open a new bank account elsewhere, because most banks check ChexSystems before approving new customers.
Before closing your account, the bank will typically send you a notice giving you time to pay the negative balance. Read any mail from your bank carefully — it will tell you the deadline and the total amount owed, including all fees.
How to recover from a negative savings account
The only way to stop the fees and prevent account closure is to deposit enough money to bring your balance back to zero or above. This means depositing the negative balance plus all the overdraft fees that have posted. If your account is $50 negative and you have been charged two $35 fees, you need to deposit at least $120.
You can deposit money by direct deposit, transfer from another account, mobile check deposit, or in-person at a branch. The deposit will post within one to three business days depending on the method. Once your balance is positive, no more overdraft fees will be charged, but the fees you already paid are not refunded unless the bank chooses to waive them.
If you cannot deposit the full amount immediately, contact the bank and explain your situation. Some banks will work with you on a payment plan or waive fees if you show good faith by making a partial deposit. This is not may provide, but it is worth asking before your account is closed and reported to ChexSystems.
Overdraft protection as an alternative
If you overdraft your savings account regularly, overdraft protection can prevent fees by automatically covering the shortfall. You link your savings account to another account — usually a checking account at the same bank, or sometimes a credit card or line of credit — and the bank transfers money from that account when you overdraft.
The advantage is that you avoid the $25 to $35 overdraft fee. The disadvantage is that you may pay interest instead. If the linked account is a credit card, you will be charged credit card interest rates (usually 15% to 25% annually) on the transferred amount. If it is a line of credit, the interest rate is lower but still applies. If it is a checking account, there may be no interest charge, but some banks charge a small transfer fee.
Overdraft protection is optional — you have to sign up for it. If you do not have it and you overdraft, you will be charged the overdraft fee instead. Check your bank's website or call to see what overdraft protection options are available to you and what they cost.
Frequently Asked Questions
Can a bank close my savings account if it stays negative?
Yes. Most banks will close a savings account that remains negative for 30 days or longer. Before they close it, they will send you a notice with a deadline to pay the negative balance. Once closed, the account is reported to ChexSystems, which makes it harder to open accounts at other banks for up to five years.
What is the difference between an overdraft fee and overdraft protection?
An overdraft fee is a charge the bank imposes when your account goes negative — usually $25 to $35. Overdraft protection is a service you can set up in advance that prevents overdrafts by automatically transferring money from a linked account. Protection may charge interest or a transfer fee instead of a flat overdraft fee.
If I deposit money after my account goes negative, will the fee be reversed?
Not automatically. The fee will post regardless of whether you deposit money later. However, you can ask the bank to reverse it, and many banks will waive one fee per year or if you are a long-time customer. There is no may provide, but it costs nothing to ask.
How long does it take for an overdraft fee to post?
Most banks post overdraft fees within one to three business days after the transaction that caused the overdraft. Some post them the same day. If you deposit money before your bank's end-of-day processing cutoff, you may be able to prevent the fee from posting at all, but timing varies by bank.
Will an overdraft on my savings account affect my credit score?
An overdraft itself does not show up on your credit report. However, if the account is closed due to a negative balance and reported to ChexSystems, it will make it harder to open new bank accounts. If the bank sends the debt to a collection agency, that can appear on your credit report and harm your score.