Insufficient funds, also commonly known as non-sufficient funds (NSF), happen when the funds in an account, typically a checking account, are not adequate to cover a check or other transaction. Each bank’s policy for overdrafts will vary, but the consequences of an overdraft are usually similar regardless of the bank. An overdraft can occur for both debit card transactions and checks. Even if an account is overdrawn only by a few cents, the overdraft fee and insufficient funds fee may still be assessed.

When an insufficient funds (NSF) fee is charged, it may be referred to as a “return check” fee or a “non-sufficient funds” fee. This fee is typically charged each time the account is overdrawn. Depending on the bank, customers may be charged one fee per item returned no matter of the size of the overdraft or if multiple transactions during the same day or week resulted in an overdraft. Insufficient funds (NSF) fees can range from $20 to $35, and some banks may cap the number of fees they will charge per day.

Once a check or other payment has been returned by the bank due to insufficient funds, the creditor or payee will usually have the right to charge collection fees for the returned check. Even if the bank does not assess insufficient funds (NSF) fees, the creditor may be entitled to collect on the shortfall by other means.

In order to avoid incurring cost from non-sufficient funds (NSF) fees and returned check fees, customers can opt for overdraft protection from their bank. Services like this offer accounts a buffer from overdrafts. Customers typically must sign up for this service, as well as understand the fees and guidelines associated with it. Even with overdraft protection, insufficient funds (NSF) fees may still be assessed depending on how much the account is overdrawn.

If you are experiencing difficulties balancing your checking account, overdraft protection services may afford users an added layer of security. While it is important to be mindful of your spending and balance, there is help. All beneficial accounts come with their own set of rules and regulations. It is important to do the research to ensure that the account from which you will be banking is the best fit for you.