What Is an NSF Fee, and What Do I Do About It?

What is an NSF? It stands for non-sufficient funds, and you might have seen it on your bank account activity. This occurs when you try to make a payment or a vendor tries to charge you, but you don’t have enough money to cover it. Sometimes, your bank will reject the transaction and issue a fee to penalize you for not having enough money in your account. 

Keep reading because we’ll explain what an NSF charge means, what it’s for, how much the charge is on average, and what you can do about it. We’ll also share new legislation and banking news aimed at protecting consumers against NSF fees.

What does an NSF charge mean on my bank account?

If you see an NSF charge on your bank account, it could have several meanings. You might pay NSF fees, overdraft fees, returned check fees, returned item fees, and even a paid item fee. In the fourth quarter of 2023, these types of fees cost consumers $5.8 billion, which is much less than in previous years. 

The Consumer Financial Protection Bureau (CFPB) shared that 43% of households that recently overdrafted were surprised by it. This can be alarming if you have multiple NSF fees, which can happen if a vendor or an app tries to bill your account multiple times. This can turn a small deficit into a big one.

Here is an explanation of the types of NSF fees and what they are.

Fee name	What it is
NSF fee	Non-sufficient fund fee, which some banks charge when you try to buy something and there isn’t enough money in your account.
NSF returned item fee	The same as an NSF fee; these terms are interchangeable.
NSF returned check fee	When you write a check and the recipient cashes it, but you don’t have enough money in your account. (The recipient might need to pay a fee too.)
NSF paid item fee	The bank charges this fee to cover a payment for you. For example, if you don’t have enough money in your account, the bank sometimes allows the purchase to go through anyway, but it charges you for this service. Some banks charge more depending on how much it covers.

If you can’t remember what transaction would have caused your NSF fee, think about any subscriptions or other automatic payments you may have. For example, did you write a check, agree to have a cash advance app automatically withdraw a payment, schedule to have rent come out on a certain day, or even accidentally pay for something twice?

Tip

If you’re considering a cash advance but are concerned about overdrafting, Empower rates as our best for overdraft reimbursement, and Brigit offers overdraft warnings and protection.

How much is an NSF fee?

Significant changes in NSF fees have occurred since 2023. In January 2024, the Consumer Finance Protection Bureau proposed a rule that declared charging NSF fees an abusive practice. The rule will prevent NSF charges on “transactions that are declined instantaneously or near instantaneously.” 

Because the CFPB has cracked down on NSF fees, major banks have responded by significantly reducing them in the past two years. The CFPB now reports that the median NSF fee is $32 (among financial institutions with more than $10 billion in assets). 

On September 17, 2024, the CFPB published best practices banks should follow to avoid violating the Electronic Fund Transfer Act (EFTA). Below are several common fees major banks charge if you have insufficient funds, but with these brand-new regulations, these fees are subject to change.

Institution	NSF fee
Chase Bank	$34
Citi	N/A
Wells Fargo	$35
Discover	N/A
Ally	N/A

As you can see, many leading banks have eliminated NSF fees in recent years. This is a promising trend. The CFPB reported that the “vast majority of NSF fees have been eliminated,” saving consumers almost $2 billion collectively every year. 

The reduction in NSF fees overall is also because banks with over $1 billion in assets must now report NSF fee revenue. Separating these numbers increases transparency and shows the public that many banks profit from NSF fees. Now that more data is public, banks are pulling back on many of these charges.

If you want to find out whether your bank charges NSF fees, check its website or call its customer service line.

How to avoid overdraft and NSF fees altogether

Erin Kinkade

CFP®

First, I suggest looking for accounts that don’t charge NSF fees and provide overdraft protection that links your checking account to savings (and use automated transfers to your savings to make sure you have cash available in that account) or links the overdraft protection to your credit card account. (The credit card should be plan B.) Budgeting apps will help you keep track of your expenses as well where you can set up alerts for deposits and withdrawals. (Anything readily available is helpful, but be sure to use safeguards to protect your information!) Finally, if you really struggle with overdraft fees, you may choose to use a prepaid debit card or cash. Use the prepaid card or cash for your discretionary expenses, and leave the remainder in your checking account to pay bills.

What happens if I get an insufficient funds notice?

If you get an insufficient funds notice, it’s wise to take immediate action to minimize your fees. As soon as you get an alert about insufficient funds or notice an NSF fee on your account, call your bank to see whether the charge is legitimate. If it is, it never hurts to ask them to waive the fee. You can also ask for advice on next steps to minimize the damage.

Chances are, your bank will advise you to add money to your account right away. If you don’t bring your account back to good standing, the bank might charge an NSF fee every time a vendor tries to take a payment. Multiple NSF fees can compound and create significant charges that can be a challenge to pay off in the future.

Example of an NSF fee scenario

NSF fees come as a result of not having enough funds to cover a purchase in your checking account. This can happen when you have multiple bills due at once. Here’s an example.

Let’s say you just got your paycheck. From that paycheck, you pay your rent, and then you pay an electric bill higher than normal due to a heat wave. However, you forgot you recently used a cash advance app to help you buy groceries before your next payday. 

The cash advance app tried to withdraw an automatic payment, but you didn’t have enough in your account. When the payment fails, your bank will immediately charge you an NSF fee, and your cash advance app will send you an email to let you know the payment failed. This happens to many people who are balancing multiple bills and responsibilities, and you’re not alone.

What to do if you’re charged an NSF fee

If you see an NSF fee on your bank account, here’s what to do.

Contact your bank

While it might feel embarrassing to call your bank about an overdraft charge, this is the first step to take. First, your bank can tell you whether the charge is legitimate. Banks make mistakes, as Chase did in 2020 when it incorrectly charged 170,000 customers overdraft fees.

Review for duplicate charges

See whether your bank charged you for NSF fees more than once. Sometimes, banks will do this if you or a vendor tried to make multiple transactions when your account was empty. You can ask a bank to reverse charges, and some might, especially if it’s the first time.

Fund your account

If you still don’t have money in your account, fund it as soon as possible. This will prevent you from incurring even more overdraft fees while you wait to see whether your bank will negotiate with you and consider reversing the charges.

Set up overdraft coverage

Find out whether your bank offers overdraft coverage. This is when your bank will automatically transfer money from your savings account if you don’t have enough money in checking.

Set up alerts

Most banks allow you to set up real-time alerts that notify you when your account is low or when transactions go through. See whether your bank offers that as an account feature, and make sure to set it up so you’re more aware of your spending.

Consider switching banks

Many banks, including online banks and large national banks, have stopped charging NSF fees. While switching banks can sometimes be time-consuming, it’s worthwhile if you know you can avoid high fees.

How to prevent insufficient funds in your account

This is how to prevent incurring NSF fees in the future.

Monitor your balance

Regularly checking your bank account balance can increase your awareness and stop you from spending if you know your balance is low. Some banks also allow you to set up low balance alerts.

Keep a buffer

Keeping a minimum amount in your account, such as $100, can help you avoid NSF fees, especially if you get charged twice or have several automatic payments.

Schedule bills for after payday

You can often change the due dates for your bills to be after payday to ensure you have enough money in your account. Many companies, including cash advance apps, will schedule your automatic payments on payday too.

Avoid writing checks

It’s rare to write checks these days, but every now and then, it happens (like needing a check to pay for your kid’s sports pictures or the babysitter.) Because writing checks isn’t commonplace, it’s easy to forget you did it. 

If you forgot about a check and it comes out of your account, you risk not having enough cash available and can get an NSF fee. So when possible, avoid writing checks.

Use a bank with overdraft protection

Many banks offer this feature. If you have overdraft protection, your bank will automatically transfer money from your savings to your checking to cover expenses.

Use a bank without NSF fees

Several bank accounts, such as Ally bank accounts and Capital One 360, do not charge NSF fees at all. These banks can close your account if you keep a negative balance for a period, so it’s best to remedy your overage as fast as possible.

Ultimately, becoming more aware of your spending patterns, using a bank that doesn’t charge NSF fees, or keeping a buffer, you can prevent getting NSF fees on your account in the future.

FAQ

Why do banks charge NSF fees?

Banks charge NSF fees to cover the administrative costs associated with processing payments that exceed the available balance in your account. When a payment or transaction is attempted without enough funds, the bank incurs costs related to reviewing and returning the payment. NSF fees also serve as a deterrent to discourage customers from making transactions without ensuring sufficient funds.

Does NSF affect your credit?

NSF fees themselves do not directly affect your credit score. Banks typically don’t report these occurrences to credit bureaus. However, if the NSF results in missed or late payments, especially if the payment was for a loan or credit card, it could damage your credit. If the NSF leads to an account being sent to collections, that could harm your credit score.

Can you get an NSF fee waived?

Yes, you can often get an NSF fee waived, especially if it’s your first time incurring the fee or you have a good history with the bank. Many banks will consider waiving the fee if you call customer service, explain the situation, and request a courtesy waiver. However, repeated NSF occurrences may make it more difficult to have fees waived.

Can you get an NSF fee refunded?

Yes, you can potentially get an NSF fee refunded under certain circumstances. Some banks may refund the fee as a one-time courtesy, especially if you contact it right after it charges the fee. Refunds may also be possible in case of a banking error or if you negotiate with the bank. Keep in mind, however, that banks are not obligated to refund NSF fees, and their policies may vary.