A bank account can go into negative balance for different reasons, from an unexpected expense to the use of credit made available by the bank. The Bank of Portugal does not establish a number of times after which an account with a negative balance is automatically blocked or closed, with consequences depending on the contract, the amount used, the time needed to restore the balance, and whether or not there is an authorized overdraft.
There are two ways an account can go into overdraft: through a contracted overdraft facility, which allows the account to be drawn beyond the deposited money up to the defined limit, or through a credit overrun, which occurs when the institution tacitly accepts that the client uses more money than exists in the account or exceeds the contracted overdraft limit. The client must repay the amount used and pay the interest and charges provided for in the contract, and repeated uses can accumulate significant interest over time.
The bank is not obligated to authorize movements that exceed the available balance or the contracted credit limit, which means card payments, direct debits, and scheduled transfers may not be executed. Additionally, bank overdrafts are considered credit liabilities and may appear in the Bank of Portugal's Central Credit Responsibilities database, information that is consulted by institutions when assessing the risk of granting new credits.
If the negative balance is not regularized within the deadline, the debt may be reported as being in default, causing other institutions to refuse new credits. The client may have to pay default interest and other charges, and the institution may resort to the Extrajudicial Default Regularization Procedure (PERSI) or, as a last resort, to the courts to recover the value, with the process potentially leading to the seizure of income or the sale of assets.