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What Are NSF Fees & How To Avoid Them?

When you spend more money than you have in your checking account, you may be charged an NSF fee. Short for “nonsufficient funds,” NSF fees can be very costly, particularly when you’re already scraping by with a low account balance. With the right planning or by choosing the right bank account, you may be able to avoid NSF fees for good. Learn more here about NSF fees and the steps you can take to avoid them.

How do NSF fees work?

NSF fees, sometimes called overdraft fees, are charges for going below a zero balance in your bank account. For example, if you have $100 in your bank account and spend $150 with your debit card, you would be overdrawn by $50. Many banks allow overdraft transactions but charge a fee for the service.

Depending on your balance, spending, and bank, you could wind up with multiple NSF fees in a single day. If you start the day with $45 in your account, then go to the gas station and spend $50, another $5 for a coffee, and $12 on lunch, you could suffer the pain of three NSF fees.

Banks charge fees described in their deposit account agreement. If you search the fine print, you’ll find exactly how your bank assesses these fees and what you can do to avoid paying them.

How much are NSF fees?

Banks charge as much as $36 per NSF, according to the Consumer Financial Protection Bureau (CFPB). In 2019, those fees earned banks more than $15 billion per year, but fees declined in 2022, likely as a result of changes in bank policy, according to the CFPB. Indeed, not all banks charge overdraft fees. Several banks charge no NSF fees or offer options to reject overdrafting transactions to avoid fees.

Banks have some leeway in processing transactions, which can lead to higher fees for unsuspecting customers. For example, a bank may order transactions from largest to smallest when processing at the end of the day, which can trigger more NSF occurrences than expected.

The CFPB works to keep banks from charging surprise NSF fees, but savvy banking customers can take steps to avoid NSF fees before they land in your account.

What are the consequences of NSF fees?

The biggest consequence of NSF fees is the cost. Paying an average of $36 per month in NSF fees adds up to $432 per year. While banks would love to earn an extra few hundred dollars per year in fees from each customer, you would probably rather keep that money for yourself.

In some scenarios where you repeatedly overdraft and don’t resolve the problem with new deposits, a bank could decide to close your account. Those with repeat problems could have their payment behavior reported to CHEX Systems, a consumer reporting agency that banks use to review and approve new accounts. With a negative CHEX history, you could be denied new bank accounts.

Are there banks that don’t charge NSF fees?

While NSF fees are commonplace in banking, a handful of banks don’t charge any overdraft or NSF fees. Here’s a look at popular bank accounts, listed alphabetically, that have no NSF fees on all or some checking accounts.

  • Axos: Axos Bank features several consumer accounts with no NSF fees. Its Essential Checking, Rewards Checking, and First Checking accounts are free of overdraft charges.
  • Quontic: The High Interest Checking account from Quontic doesn’t charge any monthly or overdraft fees. Users may encounter some rare fees for less common banking activities.
  • CIT: The CIT eChecking account has no fees for NSF or insufficient funds transactions. The bank charges some fees for less common activities on this type of account.
  • Chime®: Chime is a unique bank with no fees for using its checking account. Overdrafts are available for up to $200 total with a feature called SpotMe. If you exceed your account balance or SpotMe limit, the transaction is turned down with no fees.

NSF fees vs. overdraft fees

While we use the terms NSF fees and overdraft fees interchangeably, there’s technically a small difference between the two. Because an NSF and overdraft can occur simultaneously, most banking customers can think of the two fees as synonyms.

An NSF fee is a charge when an account doesn’t have enough funds to pay for a transaction. Whether or not the bank honors the charge, any charge that would take your account below a zero balance is an NSF transaction. It’s possible a bank would charge an NSF fee when rejecting a charge or allowing you to overdraw your account.

An overdraft fee is a charge for processing a transaction where your account balance is less than zero. Overdrafts only occur when the purchase or transaction results in a negative balance. In this situation, the bank is effectively lending you the funds to cover the transaction.

How to avoid NSF fees

You have a few methods to avoid NSF fees. Depending on your bank’s features, you could have a combination of these options. However, not all banks support features to avoid NSF charges.

  • Keep a positive account balance: The default method to avoid NSF fees is to always maintain a positive account balance. Keeping a running balance of your account helps you confidently transact, knowing you won’t go below a zero balance.
  • Turn off overdrafts: Some banks enable users to opt out of overdrafts, shutting down any possibility of paying NSF fees.
  • Use fee-free overdraft protection: Banks may offer free transfers from an overdraft line of credit, savings account, or other connected account to bring your balance back to zero without any fees.

Time Stamp: Pick an account that lets you avoid NSF fees

While banks may suggest that honoring charges that take your balance below zero is a helpful service, there’s little benefit when you spend a small fortune on fees. To some banking customers, even a single overdraft fee is too much. Thankfully, you can avoid NSF fees forever with a consumer-friendly account and good banking habits.

Frequently asked questions (FAQs)

Are NSF fees legal?

Nonsufficient funds fees are legal. Banks must follow certain regulations regarding fees. But in general, NSF fees are allowed.

How do you get NSF fees waived?

If you get charged NSF fees, you can ask your bank to waive all or some of the fees. When you ask nicely and explain the reason for the request, such as a delayed deposit, you’re in the best position to get a positive outcome.

Are overdraft fees charged immediately?

Most banks charge overdraft fees automatically when the transaction takes place. They may show up instantly or at the end of the day. Check your bank’s customer agreement to find out how your bank handles NSF charges.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.


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