Reasons Your Bank May Charge an NSF Fee

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Updated on Thursday, January 31, 2019

Reasons Your Bank May Charge an NSF Fee

Few things are more frustrating than unexpected bank fees — especially when you start to realize how much they’re costing you. According to the Consumer Financial Protection Bureau (CFPB), overdraft and non sufficient funds (NSF) fees comprise around $17 billion in annual revenue for banks.

However, only a small percentage of consumers pay the majority of these fees: the CFPB cites that only 30% of consumers overdraw their checking accounts in a given year.

Still, it’s easy to avoid unnecessary bank fees — keep reading to see how you can avoid paying any more to your bank than necessary.

What is an NSF fee?

People are most frequently affected by overdraft fees, which occur when you go into a negative balance on your checking account. When this happens, most banks will pay the difference, and then charge you a fee.

A close cousin to the overdraft fee is the NSF fee. An NSF fee is triggered when you overdraw your account and the bank refuses to cover it. Banks typically charge the same for both overdraft and NSF fees, but the amount can vary. A study conducted by Informa Research Services found that the median overdraft fees of the top-50 U.S. retail banks in 2016 hovered around $34 — an expense that you can well imagine adds up quickly.

How can you avoid paying NSF fees?

Although NSF fees also occur after an account is overdrawn, the way banks apply these fees can vary quite a bit. Some banks have a maximum number of overdraft or NSF fees per day — meaning you could be charged multiple times for transactions that continue to draw your account into negative territory and are rejected by the bank. To avoid paying too many of these, you may want to consider adopting some of the strategies below.

First, get to know your bank’s policies. Every bank has its own way of handling fees and you should familiarize yourself with them in advance. Some banks offer debit overdraft, in which they provide a line of credit to cover any overdrawn balance on your debit card. This might sound like a great solution, but keep in mind that there’s usually a fee associated with this service, too, plus any interest that the bank may charge on the overdraft amount.

If you have a checking and savings account with the same bank, another option would be to link the two accounts. This way, your savings account could cover any overdraft that might occur in your checking account. And while there might be a fee for this service too, it’s usually less than the overdraft or NSF fee.

One of the best strategies for avoiding the NSF fee or any other bank fees, however, is to simply monitor your account balance. You also should think about any automatic payments you’ve set up for your account and remember to deduct those each month, or whenever the payments are scheduled to occur. There are even apps that can help you to track your balance regularly. Some banks offer their own low-balance or overdraft alerts, along with other tools to help you manage your account. So, with a bit of attention on your part, it’s quite possible to avoid incurring these fees altogether.