NSF Fees

NFS Fees
NSF stands for “Non-Sufficient Funds.” An NSF Fee is charged when a bank account does not have enough money in it to honor a check drawn on that account.

How do NSF Fees work?

NSF fees are charged to a bank account when a check has been written for more money than what is in that same account. If the issuer of the check doesn’t have enough money in their account to cover the amount written on the check by the time the check clears, that check will be returned to the person who tried to cash it. This is also referred to as “bouncing a check.” NSF Fees can be charged for either writing a bad check or receiving one.

If you write a check that bounces, your bank will charge you an NSF fee between $27 and $35. In addition to that fee, the person or business that received the check can charge you a returned-check fee as well.[1] Returned-check fees vary by state. You can find a chart of every state’s returned-check fee here.

If you receive a check that bounces, your bank may charge you a fee for having to return the check. Since the funds from that check will be withdrawn from your account, you could also be charged overdraft fees. Receiving a bounced check can be time-consuming, as you will be forced to spend time sorting out the situation with the person or company that issued the check. It can also lead to potential troubling financial situations if the issuer of the check doesn’t cooperate right away.

What do I do if I write a check that bounces?

In most cases, writing a bad check will mean that you now owe NSF fees in addition to the amount of the original check. If you fail to pay the person or company to which you originally wrote the check, they could report you to a collection agency or sue you in small claims court. Either result would end up on your credit report and damage your credit rating, which in turn will be reported to a credit bureau and could damage your credit score.

If you bounce a check, you should first contact the person who received the check and let them know that you are aware of the situation. Ensure them that they will still receive the money you owe them.

Next, you should find another way to pay the person or company what you owe them. In this situation, there are two good solutions to try.

  1. Start by moving funds from another account into your checking account, and then have them redeposit the check. A recipient of a bounced check can only try to re-deposit the same check once, so make sure that the amount of the check will be covered by the amount in your account.[3]
  2. You can also offer to pay the person/company back in a set of installments. Most companies will use this method to ensure the full amount owed is paid off, even if it’s over a longer period of time. Each state has a different deadline for how much time a person must be given to pay off a debt before any legal action can be taken. It is important to make sure you don’t miss a payment if you choose this method for paying back a bounced check, in order to avoid any legal action.

Lastly, you should pay the NSF fees right away to avoid any potential further damage to your finances. If you take too long to pay the fee, your bank could send the unpaid debt to a collection agency. This, in turn, could lead to a derogatory mark on your credit report for an outstanding unpaid debt. NSF fees vary from bank to bank, and even from account to account, but they are usually under $50 dollars.

What do I do if I receive a check that bounces?

Once your bank has informed you that the check you received was returned, you should contact the person or company that issued you the check. If the check was issued to you by a company, they will likely issue you a new check for the same amount of money. If it’s a personal check, the issuer might ask you to try to cash the same check again.

The second thing you can do is send the check issuer a demand letter. This should only be done if you have already contacted the issuer and the situation cannot be resolved by either the issuing of a new check or by re-depositing the original check. Demand letters are also known as a “bad check notice.” These letters should be sent to the issuer of the check and their bank via certified mail and contain the following: a request for a receipt, a request to be paid within 30 days (or the appropriate state deadline), the set amount of money the original check was for, the cost for the certified mail, and the returned-check fee.[3]

If the demand letter does not resolve the issue, your next step is to sue the check issuer in small claims court. This should be done only in cases where the issuer has not responded to the letter and has missed the stated deadline for repayment. Additionally, the dollar amount of your claim must not exceed your state’s small claims limit, and you should come prepared with documentation to make your case since attorneys cannot represent you in a small claims court. Cases of bounced checks in small claims court are typically situations involving personal checks, not checks issued by companies.

What can I do to avoid NSF Fees?

The easiest way to avoid having to pay NSF fees is to balance your checkbook. This requires you to write down each withdrawal you make and deduct the appropriate amount from your checking account balance. This will allow you to see and know exactly how much is in your account at any given time. With online and mobile banking, you can even use your smartphone to keep track of your balance.

Another way you can avoid NSF fees is to get overdraft protection on your checking account. All banks offer overdraft protection, and the fee is almost always cheaper than the cost of overdrafting your account. If you have an account with overdraft protection, you will not be charged additional fees for accidentally spending more than your available funds.

References

  1. “What are NSF Fees?” Investopedia.com. Accessed July 23, 2016. https://www.investopedia.com/terms/n/nsf.asp
  2. “NSF Check: When a Chek You Wrote (or Received) Bounces.” WalletHub.com. Accessed July 23, 2016. https://wallethub.com/edu/bounced-check/13879/
  3. “What you need to know about bounced checks.” Credit.com. Accessed July 23, 2016. https://www.credit.com/personal-finance/what-you-need-to-know-about-bounced-checks/