What is an NSF Fee?

If you write a bad check, you may face a nonsufficient funds (NSF) fee. The good news is there are ways you can avoid this situation. There are also strategies that can help you out if you happen to receive a bad check. Let’s dive deeper into what NSF fees are and how they work and how to avoid NSF fees.

What are Nonsufficient Funds (NSF)?

The term nonsufficient funds (NSF) means that you don’t have enough money in your checking account to cover a transaction. If you write a check for $200, for example, and there’s only $150 in your account, you have nonsufficient funds.

How do NSF Fees Work?

If you write a check for more money than you have in your checking account, you may have to pay an NSF fee that will be charged by your bank or credit union and vary in amount. On average, however, most NSF fees range between $10 and $50.

Why do banks charge NSF fees?

If your bank refuses to process a payment because of insufficient funds, you will likely be charged an NSF fee. This fee is meant to cover the costs incurred by the bank when processing an NSF transaction. These costs can include things like staff time spent processing the transaction, as well as any fees charged by the payee's bank for returning the payment.

Can I get an NSF fee waived?

NSF fees can be waived in certain circumstances. To see if you qualify, you'll need to contact your bank or credit card issuer and provide proof of financial hardship. If your NSF fee is waived, you may still be responsible for other fees associated with your account.

NSF fees vs. overdrafts fees

NSF fees and overdraft fees are both charges that can be applied to your account if you don't have enough money to cover a transaction. An NSF fee is charged when you try to make a purchase but don't have enough money in your account to cover it. An overdraft fee is charged when you try to make a purchase and don't have enough money in your account to cover it, but the bank approves the transaction anyway.

NSF fees can be avoidable if you keep track of your account balance and make sure you have enough money to cover all your transactions. Overdraft fees can be avoidable if you linked your checking account to another account, such as a savings account, that has enough money to cover any transactions that would cause an overdraft. You can also opt into overdraft protection, which may come with a fee, but will limit the amount of fees you'll be charged if you do overdraw your account.

What Should I Do If I Write a Bad Check?

It’s a good idea to take the following steps if you write a bad check:

Contact the Recipient About the Check

Reach out to the recipient and make them aware of the situation. Be honest and straightforward, even if you’re embarrassed. Make it clear that there aren’t enough funds in your account to cover the check you wrote them.

Move Funds into Your Checking Account If Possible

If you have money in your savings account or another place you can easily access, move some funds into your checking account. Be sure to transfer enough cash to cover the full amount of the check you wrote.

Make a Payment Plan with the Recipient

Collaborate with the recipient to design a payment plan. You may offer to write them a new check in a few weeks once you get paid. Or maybe you’ll take out a personal loan and repay them as soon as you receive your funds.

Pay the NSF Fees to the Bank

Cover the NSF fees as soon as you can. If you delay or simply ignore payment, this can hurt your relationship with your bank. Therefore, it’s in your best interest to pay what you owe and avoid NSF fees in the future.

What Should I Do If I Receive a Bad Check?

If you try to deposit a check and are unable to because of nonsufficient funds, take the following steps:

Contact the Check Issuer

Inform the person who wrote you the check that you weren’t able to deposit it. Do so in a friendly, non-judgmental way and give them a chance to explain the situation.

Try to Redeposit the Check

After a few days, try to redeposit the check. You may find that there are now enough funds to cover it. There’s a possibility the issuer has received their paycheck or transferred money from another account.

Send the Check Issuer a Demand Letter

If you’re still unable to deposit the check and the issuer is not willing to work with you, write them a demand letter. Find a template online and send the letter via certified mail with a return receipt.

Take Legal Action If Needed

In the event the check issuer receives your demand letter and does not pay you, you may file a lawsuit. Since every state has a set number of days that you must wait before you take legal action, it’s important to familiarize yourself with the laws in your state.

How to Avoid NSF Fees

Here are some tips to help you avoid NSF fees altogether.

Balance Your Checkbook

Every time you write a check, you may want to balance your checkbook to avoid NSF fees. If you realize you don’t have enough funds to cover a check you’re about to write, come up with an alternative payment method.

Set Up Low Balance Alerts

You can enroll in low balance alerts through your bank or credit union. You’ll get notified every time you’re about to overdraft or your checking account dips below a certain threshold.

Get Overdraft Protection on Your Checking Account

With overdraft protection, your checks will go through, even if you don’t have enough money in your account to cover them. The caveat, however, is that you’ll have to pay for overdraft fees, which are not cheap.

Only Write Checks If You Can Cover Funds

Be cautious every time you write a check. Look at your checkbook or checking account beforehand. If you know you don't or won’t have enough funds to pay the recipient, do not write the check.

Advance America Can Help You Avoid NSF Fees

Advance America can help you cover a check with ease. If you apply for a payday loan, installment loan, or another loan we offer, you can receive your funds that same day. By using our loans to cover your costs, you won’t have to worry about costly NSF fees or alternative payment options like credit cards. Best of all, you don’t need good credit to get approved and you can apply from the comfort of your home via a short online application form.