Immediate Consequences

• Once the amount in your bank account becomes negative, the bank is no longer under any obligation to honor debits you try to make. If you pay bills via checks, those checks will be declined. If you try to use your bank debit card to withdraw money or purchase items at stores, it will be declined. Automatic payments you’ve scheduled will also be declined. Additionally, you will likely face overdraft fees for any item your bank does accept. These fees vary by institution, but can quickly add up. If payments for your bills can’t go through because of insufficient funds, your creditors may charge additional fees for late or bounced payments.
  
  

Account Closure

• Each bank has a set of procedures in place regarding how to deal with accounts with insufficient funds. If you’re unable to deposit funds to bring your account positive, after an extended period, the bank may close your checking account. After your account is closed, your account will be sent to collections, where a collection agency will try every legal means available to get you to pay what you owe. If you still can’t or won’t pay, it’s possible for your bank to sue you if its claim is within the legal statute of limitations for your state.
  
  

Chex Systems

• Many banks report to a consumer credit reporting agency called Chex Systems. This company functions similarly to the three credit reporting agencies, Equifax, TransUnion and Experian -- but for bank accounts. If you have negative items in your banking history, such as overdrafts and insufficient funds, you may have a file with Chex Systems. When a bank closes your account “for cause,” such as an extended period of insufficient funds, this is also reported to Chex Systems. Negative items stay on your Chex Systems report for five years as of August 2011.
  
  

Considerations

• Banks don’t just report negative items to Chex Systems -- they consult Chex Systems when you try to open new accounts. If your bank account is closed because of insufficient funds at one bank, another bank may see your Chex Systems file and refuse to open a new account. You can pay the money you owe to the original bank, and your Chex Systems file will be updated to reflect payment. However, the negative remark may still not be removed until five years have passed.