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NSF Fee – What Is It and How to Avoid It?

By Kyle Kapper

Updated Sep 29, 2023

NSF Fees

    NSF fee, overdraft, and many others are among those fancy terms that get thrown around by your bankers, advisors, and friends who are seemingly more educated in finance. Though you will encounter individuals who enjoy confusing others and feeling superior, your bank teller is likely not a part of that group. Besides, you’ll find that the definitions are not so hard to understand.

    If you’re looking for a straightforward explanation of NSF fees, you’ve come to the right place! Keep reading to understand what the abbreviation NSF stands for and how you can avoid any additional fees at your bank.

    What Is an NSF Fee?

    To understand what NSF fees are, you need to understand the abbreviation first. NSF stands for Non-Sufficient Funds. A client can be charged an NSF fee when they try to make a payment and fail due to insufficient funds in their account. Here is an example:

    1. You have $10 in your checking account.

    2. Netflix charges you $13.99 for the Standard subscription, as it does every month. Except for this time, you’re short $3.99 for a successful payment.

    3. The virtual check will “bounce” back to your account. The bounced check comes with a non-sufficient fund fee.

    In essence, an NSF fee is a fee the bank charges you for cashing a check you can’t afford. The bank has to try to cash your check before confirming that you don’t have sufficient funds. Essentially, you’re paying the bank for its failed efforts to cash your check as the transaction was unable to be completed due to a lack of funds.

    How High Is an NSF Fee Charge?

    The example above is a trivial and common one, though it is pretty silly. The reason for that is that NSF fee charges often far exceed the missing amount (in our case, $3.99). In fact, the fees can reach as high as $39 per charge. In 2020 the average NSF fee charge in North America was $33.47. The details will usually depend on your bank and account type. However, even a fee as small as $5 is still an inconvenience to pay.

    How to Get Your NSF Fee Paid?

    It’s simple; the bank will take the money out of your account! Thus, you don’t really have a choice about how you’re going to pay your NSF fee. The money will be taken out of your account automatically. If you’ve accumulated a few unpaid fees, the bank can close your account after not receiving payments for an amount of time.

    To get your NSF fee paid, you can simply:

    • Add the missing amount to your checking account.

    • Contact the bank and ask them for step-by-step instructions.

    Why Do Companies Charge an NSF Fee?

    The companies that charge NSF fees are banks. Be it the national bank or a smaller private bank; chances are, they will charge NSF fees any opportunity they get. There is only one reason for it – profit. Banks will tell you that they charge for the inconvenience of working on a check that didn’t go through. Either way, they make bank on NSF fees (pun intended).

    In 2020, US banks collected over $12.4 billion in overdraft fees (and other related fees). We can’t say for sure how much money banks potentially lose when you cash a check you can’t afford, but we are guessing it’s a lot less than what they are charging you.

    NSF Fee vs. Overdraft

    NSF fees and overdrafts are often confused and used interchangeably. Though the two are pretty different, they are similar in one important way – they are related to an insufficient balance in your account.

    As you already know, NSF fees are charged on checks that you write. For example, if you only have $100 and write a check for $120, the bank will refuse to let it through due to a lack of funds in your account. Thus, you will be charged an extra fee for sending a check that you can’t afford to pay.

    Overdraft is a little different. Say you have $100 in your account, and you send out a payment of $120. In the case of an overdraft, the bank lets the payment through. However, you end up with a negative $20 in your account. Since you’ve just spent money you didn’t have, you will have to give the bank that money back, plus an overdraft fee for borrowing money last-minute. Most banks charge overdraft fees.

    Below is a breakdown of overdraft fees that some of the more popular banks charge.

    Can You Get an NSF Fee Item Returned?

    One of the most common questions regarding NSF fees is: Can I get the bank to waive my NSF fee? The answer is, you can! Well, you can at least try. There is no guarantee that the bank will waive your fee. However, if it’s your first-ever NSF fee or the first one in a while, they just might. All you have to do is ask!

    • Be polite to the person you’re talking to. Even though getting an NSF fee is frustrating, and you probably didn’t mean for it to happen, it’s also not the direct fault of the person you’re talking to. The nicer you are, the more they will want to help you.

    • Chances are, the person you’re talking to wants to help you. If they can’t waive the fee(s), they can perhaps do something else. Ask if there is any other way they can help you, and you might just be surprised!

    How to Avoid an NSF Fee?

    Prevention is the best defense. While prevention is not always realistic in some situations, you can do a few things to avoid NSF fees in the future. In essence, all you need to do is make sure you never send out a payment that you cannot cover with the money in your checking account. Here are some tips!

    Overdraft Protection

    Overdraft Protection allows you to borrow money from the bank last minute or go into overdraft. Though this is not the best solution, as it comes with high fees of its own, it will prevent you from ending up with NSF fees. Your transaction will go through overdraft protection, and you will need to pay the bank an overdraft fee.

    Link a Backup Account

    Most banks will allow you to link a backup account or card to your checking account. Then, if you’re ever in a situation where you accidentally sent out a payment that you can’t cover, the money can go out of the backup account. Use a credit card or an account you have with another bank.

    Avoid Autopay

    We are taught that having your bills on autopay is a tell-tale sign of financial health and wealth from a young age. That’s not wrong! Besides, autopay helps forgetful individuals pay their bills on time and avoid late fees. However, that simply doesn’t work if you don’t have enough money in your account!

    If you’ve become a victim of NSF fees lately, take your bills off autopay. Set up reminders on your phone, mark the dates in your calendar, or pay months in advance. Always check your account balance before you write the check to make sure you have sufficient funds.

    Low-Balance Alerts

    Often, you end up with NSF fees because your balance was too low, and you didn’t know it. To prevent this from happening in the future, ask your bank to alert you every time your balance falls below a certain number. Most banks will set you up with a low-balance alert in the form of a text message or email. This way, you can always be sure you have sufficient funds.

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