NSF charge: How do NSF fees work?

If you are making purchases with money from a checking account and the amount you spend exceeds the amount you have in your account, you may be hit with an NSF fee charge by your bank or credit union.

NSF (non-sufficient funds) fees — often called returned item fees — and other bank fees are often a point of conflict between consumers and banks, according to Investopedia. Fees like these are a large part of how banks make their money, but many consumers feel that these fees are unfair.

In fact, some customers claim banks use deceptive methods to maximize the number of fees they can charge, charging more than one NSF fee to a single transaction, or take issue with the practice of charging high fees for small overdrafts.

Additionally, many consumers take issue with the fact that banks make this large percentage of their income at the expense of their most financially vulnerable clients. Recently, customers at TD Bank filed a bank fees class action lawsuit calling the bank’s NSF fee policies unfair. 

Banks make billions every year by charging these kinds of fees. In 2020 alone, banks collected more than $30 billion in overdraft fees, per CNBC.

On average, individually consumers were hit with an average of $329 in bank fees in 2017.

How much are NSF fees?

NSF fees range between $10 and $35. Most are on the higher end of that scale, with the average NSF fee sitting at $33.58 in 2021, according to Bankrate. Each time a customer overdraws their account, a bank or credit union can hit them with a fee. So, a customer may attempt to make a number of purchases before they realize they’re out of funds, racking up a fee each time — and putting themselves further into arrears.

The non-sufficient fund fees are the same for the fees charged for a purchase made electronically or for a bounced check.

NSF fees versus overdraft fees

NSF fees are different from another type of fee, the more commonly known overdraft fees.

Overdraft fees are charged when a person has attempted to make a purchase that exceeds the amount of money in their account and the bank allows the charge to go through. Overdraft fee programs are advertised as a convenience that gives customers “flexibility” with their money, but many credit unions face lawsuits for allegedly corrupt fee practices.

In contrast, NSF fees are charged when a customer tries to spend more money than is available in their account and the bank does not let the charge go through. In other words, banks can charge a fee if they let the charge go through, and a fee if they don’t.

NSF fees and bounced checks

You can be hit with an NSF charge in a number of situations — you can incur them when a purchase exceeds your limit, or when you write a check that exceeds the amount of money in your account. This can cause the check to “bounce,” and can cause you to incur a non-sufficient funds fee.

Customers may also be charged multiple NSF fees for a single transaction, if the bank continually tries to resubmit the transaction for payment.

Sometimes, checks can bounce because they are processed on different payment schedules, so while some checks may clear, others written around the same time may not. If you are writing checks, it is important to keep in mind that these different schedules can cause you to incur an NSF charge when you might not expect to, as you may not have sufficient funds in your account depending on when the check clears.

In fact, if a person writes a check for which they do not have sufficient funds in their account, in many cases, both the person who writes the check and the person who attempts to cash it may have to pay a fee.

There are some methods of avoiding being hit with NSF fees.

Filing a lawsuit over NSF fees

A growing number of people are turning to litigation over unfair bank fees, including overdraft and NSF fees. If you have been hit with unfair NSF fees from your bank or credit union, you may be able to file a lawsuit and pursue compensation.

Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

Join a free returned item fee class action lawsuit investigation

If you were charged multiple returned item fees (also known as NSF fees or insufficient funds fees) on the same transaction by your bank, you may be entitled to compensation.

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This article is not legal advice. It is presented
for informational purposes only.