Yes, NSF fees are legal—your bank or credit union can charge you a fee for bounced checks. Keep in mind that your bank is free to set its own fee rates. But financial institutions must disclose their fees when customers open a new account, thanks to the Truth in Savings Act. Here are six ways you can avoid NSF fees. One of the best ways to avoid NSF fees is to stay on top of your expenses. You can track expenses using a monthly budgeting spreadsheet or a budgeting app that tracks the expenses of linked accounts.
Along with tracking expenses, make it a habit to keep an eye on your checking account balance and posted transactions.
Look at which transactions have cleared and which ones are still unaccounted for. Some banks allow you to link another bank account , like a savings account, to your checking account. If you overdraw on your checking account, the bank moves over funds from the other account to cover any pending transactions.
Check with your bank to see if this is an option. Having a cushion in your account can help defend you against NSF fees. Many banks allow you to set email or mobile alerts and notifications if your bank account is low. Take advantage of this feature as a backup to tracking your account balances and transactions. You never know when something might slip through the cracks or you may forget about a payment.
Non-sufficient funds and the fees associated with them can be an annoyance and put a strain on your financial life. Fortunately, with intelligent money management, you can avoid paying fees for non-sufficient funds. Kevin Payne is a personal finance and travel writer who writes about credit cards, student loans, debt, credit, and family finances. Kevin lives in Cleveland, Ohio with his wife and four kids. He has more than a decade of experience as personal finance editor, writer and content strategist.
Select Region. United States. United Kingdom. Kevin Payne, Mitch Strohm. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. What Are Non-Sufficient Funds? Below are some examples of when a bank or credit union may charge you an NSF fee. Fraudulent Checks Banks are required to make funds available the next business day when you deposit a check in a branch or by the second business day if you deposit by ATM or at night.
Banks should never charge you an NSF fee and overdraft fee for the same transaction. Monitor Your Checking Account Regularly Along with tracking expenses, make it a habit to keep an eye on your checking account balance and posted transactions. Non-sufficient funds NSF is an error accountholders can avoid. Bankrate explains. Non-sufficient funds is the term used when the holder of a checking account is overdrawn — meaning there is not enough money in the account to pay the check written against it.
This is why it is good to have a second account or an overdraft line as a backup in case the primary account runs low on funds. The recipient of the bad check also may incur bank charges. If the payee has a second account with the bank, his bank will be able to fund the check. Jimmy went immediately to his bank to make a deposit that would more than cover what he owed the roofing contractor and the NSF fee. Jimmy wrote another check to the roofing contractor, which cleared without a problem.
That means you could end up with an NSF fee for all four payments. But what about when the fee will hit your account? It can take weeks for a bank to detect and bounce a fraudulent check. So if you deposit a bad check someone else gives you, it could be a while before the bank figures it out, reverses the deposit and potentially charges you any NSF fees. The bank charges an overdraft fee, but your payment gets processed.
In general, many banks provide overdraft protection automatically to cover checks or electronic ACH payments. But to receive overdraft protection for debit card transactions, you need to opt in. Here are a few tips to help you avoid them.
Image: Man holding bill and calculator, figuring out why he was charged and NSF fee.
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