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What Are NSF Fees? (and How to Avoid Them)

You’re running around doing errands and you stop to log onto your bank account. You discover that in the midst of your busy day, you’ve somehow overdrawn your account. Now you’re being charged an NSF fee, and you’re so confused.

What’s this fee dragging down your balance even more? And how can you get rid of it?

What is an NSF Fee?

A non-sufficient funds fee is a fee your bank charges when you overdraw the account and you have a negative balance. Banks charge this fee because they have to cover the difference while your account is in the red.

You may also be charged if you wrote a check to someone else and they tried to cash it, but there weren’t enough funds in the account. The bank will charge an NSF cheque fee. The fees depend on your bank, but are often around $45.

These fees are designed to discourage people from overdrafting their accounts and not having enough money.

How to Avoid NSF Fees

The easiest way to avoid NSF fees is to always have enough money in your bank account. If you keep a buffer in your checking account, you never have to worry about overdrawing your account.

If you keep incurring NSF fees because you keep too much money in your savings and not enough in your checking, move a small amount from your savings to your checking account. It’s not worth trying to earn a higher interest rate in your savings account if you end up paying a $45 NSF fee every few months.

You can also find a bank that notifies you when your balance is low. Some banks do this by text or email. When you get this notification, you can transfer more money from your savings account to your checking. Some fintech apps also send reminders when you have a low balance.

If you still use checks, make sure to note how much money you have when you write the check. It’s easy to forget about checks you’ve written because there’s no way to be reminded of them. If possible, try to switch to online payment. Most checks expire only after six months, so you could wind up having an account overdrawn because someone deposited your check five months after you wrote it.

Some people experience NSF fees because they set their bills to be automatically paid the same day. If possible, stagger your dates so they don’t all fall on the same day. You can base them on different pay cycles.

If you accidentally spent more than you earned one month, you may have to keep a balance on your credit card to avoid overdrawing your bank account. You’ll pay interest on the credit card, but that’s preferable to owing an NSF fee.

It’s better to make minimum payments on your debt than try to pay the max and overdraft your account. Make the minimum payment automatic and then pay extra manually, once you know how much you can afford to pay.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

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