Not having enough funds to cover a charge results in a non-sufficient funds fee (NSF). It happens when you write a check and can’t cover it and sometimes even with debit card transactions (but not all).
NSF fees are costly, and embarrassing especially if you wrote a bad check. Learn what they are, how to avoid them, and what happens if you get hit with an NSF fee.
What is the NSF Fee?
When you bounce a check (there aren’t enough funds to cover it), the bank charges a Non-Sufficient Funds Fee. Most banks charge between $27 and $35 per bounced check; the amount varies by state regulations.
NSF fees also occur with regular charges, such as a Netflix subscription. Charges that normally come out of your bank account that you can’t cover incur an NSF fee.
That’s not all, though. The check recipient can also charge a $20 – $40 fee. This covers the costs they incur for depositing a ‘bad check’ plus the hassle they experienced dealing with the bounced check.
How Does it Work?
If you write a bad check, your recipient won’t know right away that the check bounced. It’s not until the next business day (depending on the bank’s schedule) that the recipient’s bank will know about the insufficient funds.
The recipient receives notice that the check bounced and they may or may not be charged a fee. Your bank then charges you an NSF fee for writing a check and not carrying the correct balance to cover it.
Can you Avoid the NSF Fee?
The only way to avoid a non-sufficient funds fee fee is to budget your funds. Reconcile your checkbook often and don’t write a check unless you know you have the funds available. Keep track of the checks you write and when they clear so you always know if the funds are available.
If you have autopay set up for your bills, use a strict budget. Know the dates the items are withdrawn and make sure you have the funds available.
It can be tricky to manage your budget when writing checks, since checks take a few days to clear, so it might even be worth abandoning writing checks all together. There are several benefits to using a quicker method such as Venmo or ACH instead of writing checks. Having money spent immediately reflected in your account makes it that much easier to manage your budget and never overspend.
What to do After a Bounced Check
Banks cover auto pay bills and just charge you the NSF fee to make up for it (plus the amount of the bill).
Checks they don’t cover, which means you have to make good on the debt using these steps:
- If you fixed the situation and have the funds available, ask the recipient to redeposit the check.
- If you’d rather they not redeposit the check, pay the recipient in cash.
- Ask the recipient how much the bank charged them for the bounced check and reimburse the fees.
- Make sure you paid the NSF fees to your bank (most take them automatically) to avoid them sending it to a collection agency.
Will Banks Reverse NSF Fees?
Banks aren’t required to reverse non-sufficient funds fees, but they can. If you have a positive history up until this point, ask them to reverse it.
The key is to act quickly. Don’t wait until you get your monthly statement and then ask them to reverse it. If the bounced check happened a few weeks ago, banks aren’t likely to reverse it. Monitor your bank account often and call right away if you notice an NSF fee that you missed.
Avoid Non-Sufficient Funds Fees if you Can
Do your best to avoid non-sufficient fund fees. Keep a careful budget and monitor your checking account. Life happens and sometimes we make mistakes or overlook certain expenses. Carefully monitoring your accounts and spending will help avoid unnecessary fees.
NSF fees add up quickly and make it hard to stay on budget. Know what you’re dealing with, trim your budget where you need to, and avoid expensive banking fees. If you constantly find yourself paying NSF fees, it’s time to revisit your budget and figure out a better way to handle your finances.