What Are NSF Fees and How to Avoid Them

Trying to pay a bill only to find that your checking account doesn’t have enough money is stressful. Nonsufficient funds (NSF) fees can make this experience feel even worse.

But with planning, you may be able to avoid NSF fees and all the stress that comes with them altogether.

What is an NSF fee?

A nonsufficient funds (NSF) fee is a fee your bank charges when there isn’t enough money in your account to cover a bill or check. The bank declines the transaction and then charges you. These fees are also sometimes called “insufficient funds” fees.

How NSF fees differ from overdraft fees

Many people confuse the terms “NSF fee” and “overdraft fee.” The two are related, but there are key differences between them:

Both types of fees can potentially put your bank balance in the negative. Because banks charge NSF fees for declined transactions, you’ll just be charged the amount of the fee (not the amount of the rejected transaction).

With an overdraft fee, the bank covers a transaction for you and then charges you for doing so. You owe anything the bank covered in excess of your balance and the overdraft fee.

How much are NSF fees?

Not having enough money in your account to cover a bill or transaction is stressful enough. Getting charged a penalty for it is even worse. So if your bank account balance is low and you have bills coming up, you might be wondering how much banks charge for NSF fees.

That amount varies depending on the bank, but the average fee nationwide is around $30. Keep in mind that NSF fees are charged per instance, so if you have multiple declined transactions, your fee balance might be higher than you expect.

Read more >> What happens when your bank account goes negative?

How NSF fees can affect your credit

NSF fees don’t directly impact your credit. However, if you never replenish your bank account balance or pay your bank what you owe, it could be sent to a collection agency.

Remember that when a bank charges you an NSF fee, it means they haven’t covered the transaction for you. If you don’t find a way to make a payment on time, you might owe late fees or see negative marks on your credit report.

Fortunately, a payment that’s a few days late is unlikely to appear on your credit report. Usually, lenders only report to credit bureaus after 30 days of non-payment.

Read more >> ​​How to remove collections from your credit report

How to avoid NSF fees

When money is already tight, extra fees may make it more difficult to get back on your feet. Here are a few tips to help you avoid them:

Set up low balance alerts

Pay attention to your bank balance to avoid dipping lower than your debts. Check your bank’s app or ask a representative to learn whether your bank allows for automatic low balance alerts. By setting up these alerts, you receive a text or email when your account drops below a threshold you specify, like $100 or $200.

Link a backup funding source

Having an alternate source of funding lined up can give you peace of mind. For instance, many banks allow you to link your savings account to your checking account. If there isn’t enough in your checking account to cover a given transaction, your savings account can cover the rest.

Track recurring payments and due dates

Putting your bills and other monthly payments on autopay can be a smart way to avoid accidentally missing a payment. However, if you aren’t tracking where your money goes, your balance might be too low to cover your expenses.

Even if you have payments on autopay, write down your payment amounts and due dates. Writing them in a planner or calendar means you’ll be less likely to forget what’s due and when.

Keep a buffer in your checking account

When you’re stretched thin and already having trouble making ends meet, it might not always be possible to have a buffer. Try to have at least a few hundred dollars left in your account by the end of the month. That way, if you run into an unexpected expense, you won’t have to worry about another transaction being declined.

Ask your bank to waive the fee

Knowing how to avoid NSF fees can be helpful. But what if you’ve already been hit with one (or more than one)? If you politely ask your bank as soon as you notice the charge, they might agree to waive your fee.

Most banks and financial institutions are willing to waive one per year. Your request is more likely to be approved if this is an isolated incident.

Read more >> How to make a budget you’ll stick to

Build your credit and your finances

Although NSF fees don’t have a direct impact on your credit, they can cost you more money over time. That can make it harder to pay off debt, save for emergencies, or reach bigger financial goals.

Building credit works similarly, opening up cheaper options than a $35 fee. Kikoff's Credit Account reports your on-time payments to all three credit bureaus, helping you build the payment history that carries the most weight in your score. No hard credit check required.