What Are Non-Sufficient Funds (NSF) Fees?

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  • Non-sufficient funds fees may occur when you overdraw from an account and the transaction is denied.
  • Some common examples that result in NSF fees include bounced checks or declined bill payments.
  • Some banks have eliminated NSF fees in recent years because they are costly for consumers.

When a bank says there are non-sufficient funds, it means that there isn’t enough money in your account to cover your transaction.

Unless you’ve opted into overdraft protection, the bank may decline the transaction and charge you a fee. Here’s everything you need to know about non-sufficient funds fees (also known as NSF fees) and how to avoid them.

What is a non-sufficient funds charge? 

A financial institution may charge you a non-sufficient funds fee for a transaction that doesn’t get processed because you don’t have enough funds to maintain a positive account balance. Bounced checks or declined bill payments are some of the most common examples of transactions that result in NSF fees.

See Insider’s best banks for overdrafts>>

How much is an NSF fee? 

The average NSF fee was around $34 in 2022, according to the Consumer Financial Protection Bureau (CFPB). However, several banks have reduced NSF charges to $10 in the last year. 

Bear in mind that you also might have to pay fees from other companies if your transaction is denied. For example, if you missed a bill payment, you might have to pay late fees because your transaction didn’t go through.

How non-sufficient funds fees impact consumers 

David Rothstein, senior principal at the nonprofit organization Cities for Financial Empowerment Fund and a leader of the Bank On Initiative, points out that non-sufficient funds fees can be really costly for some consumers.

Research studies have shown that it tends to be the same consumers who are your typical serial overdrafters,” says Rothstein. “It can be really hard on a family budget and paycheck.”

For people who can’t pay overdraft fees, the bank may ultimately close their bank accounts, leaving them unbanked.

The FDIC also found that some financial institutions charge multiple NSF fees for the same transaction, which can be harmful to consumers.

Federal agencies like the CFPB and FDIC have taken action recently to help consumers and provide guidance to banks.

In August 2022, the FDIC issued supervisory guidance and encouraged banks to review overdraft practices and consider eliminating or reducing NSF fees. In the same year, the CFPB also launched an initiative to create rules and industry guidance regarding overdraft charges.

How to avoid NSF fees

Here are a few tips for steering clear of NSF fees.

Enroll in an overdraft protection program so your transactions can go through

You can enroll in overdraft protection when you open a bank account, or contact customer support to sign up if you would like to make changes to a current bank account. 

“Having that protection program is typically a net benefit for people and better than not having it,” says Kevin Mahoney, a CFP professional and the host of Financially Well.

Overdraft protection programs can vary at financial institutions. The best option will be to find a program that doesn’t charge any fees.

Some banks have a free overdraft option that lets you link your checking account to a savings account. When you overdraw your account, money will transfer from your savings account to restore your checking account balance. Other banks may charge you a fee for the transaction, but it will generally cost less than an NSF fee. 

Set alerts for your account balance

Another way to avoid NSF fees is to see if you can set alerts for when your account balance is low.

Some banks have a service that sends you text messages or emails when your balance hits a specific dollar amount. Some of the best budgeting apps also have features that monitor your bills and spending habits to avoid fees.

Find a bank that doesn’t charge NSF fees

If you’re looking for a new bank account or considering switching banks, you could look for a financial institution that doesn’t charge NSF fees.

Our best free checking accounts guide includes some online banks and credit unions that do not charge these fees.

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