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Nonsufficient funds fees are charges that some banks assess if you attempt to make a transaction without enough funds in your account. You can avoid nonsufficient funds fees by keeping enough money in your account to cover any expected payments or by choosing a bank that doesn't charge these fees.
What Are Nonsufficient Funds (NSF) Fees?
Nonsufficient funds fees, or NSF fees, are fines that your bank or credit union may charge when a payment from your account is declined due to lack of funds. Typically, NSF fees happen when you bounce a check or don't have enough cash in your checking account to cover an ACH payment, like a bill set to autopay.
NSF fees can add up quickly, with charges averaging $34 per instance, according to the Consumer Financial Protection Bureau (CFPB). Plus, the merchant or company you were planning to pay may charge you a late fee if your payment ends up overdue.
Do All Banks Charge NSF Fees?
While NSF fees used to be common, not all banks charge NSF fees. In recent years, a growing number of major financial institutions have stopped charging their customers NSF fees altogether. As of October 2023, the CFPB says that the "vast majority of NSF fees have been eliminated, saving consumers nearly $2 billion annually."
Many major banks have stopped charging NSF fees. However, there are still some banks that continue to charge these fees.
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NSF Fees vs. Overdraft Fees
Both NSF fees and overdraft fees are types of charges you may incur from your bank or credit union when you don't have enough cash in your account to cover a transaction. However, NSF fees are only charged when your financial institution rejects a payment due to insufficient funds. Overdraft fees, on the other hand, are charged when your bank covers the cost of the payment, even when you're lacking the funds.
How to Avoid Nonsufficient Funds Fees
Nonsufficient funds fees aren't cheap. And if your bank account's funds are already low, you could also get slapped with overdraft charges—costing you even more in unnecessary bank fees.
Here's a closer look at some of the ways you can avoid paying NSF fees:
- Don't be afraid to switch banks. Many banks won't charge you an NSF fee—even if you don't have enough funds in your account to cover a check or other payment transactions. If your current bank charges NSF fees and you want to avoid them completely, it may be a good time to consider shopping around for a new bank that doesn't charge NSF fees.
- Keep a close eye on your account balance. If you decide to stick with a bank that does charge NSF fees, you can still avoid paying them if you have enough cash on hand to cover any paper checks you write and ACH payments. Regularly checking your balance through your bank's mobile app or website can help you stay on track.
- Sign up for balance alerts. Check with your bank or credit union to see if they offer low-balance alerts that send you a notification when your account dips below a certain total amount. For example, you may be able to customize an alert when your checking account balance is less than $100. Banks usually send these alerts by email or text message, so you'll know right away when funds are getting low.
FAQs
Here are a few commonly asked questions about nonsufficient funds fees:
Some banks will waive NSF fees after they've been charged, especially if it's the first time you've been hit with a fee. Bank policies vary, but if you were charged an NSF fee, you can try contacting your bank's customer service team and request a refund.
No, NSF charges do not directly impact your credit. However, if you don't pay the NSF fees, your bank could send the amount you owe to collections, which could end up on your credit report. Additionally, if a payment doesn't go through to a creditor because you didn't have enough money in your account, it could affect your payment history which is typically reported to the credit bureaus.
Yes, at this time NSF fees are legal. However, since consumers receive no services from their financial institution in return for paying this fee, the CFPB is currently evaluating whether and in what circumstances NSF fees are legal.
The Bottom Line
Getting charged a nonsufficient funds fee by your bank can be frustrating—especially if your account balance is already running low. If you're concerned about NSF fees, keeping tabs on your budget can help you avoid low bank balances, or you can find a bank that doesn't charge NSF fees.