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Published November 29, 2022

What Is A Non-Sufficient Funds (NSF) Fee?

An NSF fee can cost nearly $50, but the expense isn’t the only serious consequence — overdrawing your account can also hurt your credit score.

Banks charge non-sufficient funds fees, or NSF fees, when you attempt to spend more money than you have in your account. This may occur if a cheque you wrote is processed or a pre-authorized payment comes out of your account, and you don’t have the funds to cover the transaction. In response to the error, the bank may penalize you with an NSF fee, which typically costs close to $50.

Beyond the added cost, NSF fees can impact your credit. Learn how to prevent non-sufficient funds charges from affecting your account balance and financial future.

What happens when you get an NSF charge?

If a transaction drops your account balance below zero, your bank can choose to reject the transaction for non-sufficient funds, or approve the transaction and charge an overdraft fee.

You’ll probably get hit with an NSF charge if you don’t have overdraft protection. NSF or insufficient funds notices are typically found on transaction receipts and on bank statements.

How much are NSF fees?

NSF fees vary by financial institution, but an insufficient funds charge from Canada’s Big Six banks usually ranges between $45 to $48.

You may also need to pay a returned cheque fee, which the recipient’s financial institution sometimes charges.

Can an NSF fee be waived?

Yes, but it depends on your financial institution. Your bank may waive or refund an NSF charge from your account if you request it be removed. There’s no guarantee the charge will be reversed, but it doesn’t hurt to ask.
Typically, banks are more likely to refund first occurrence NSF fees for customers who otherwise keep their accounts in good standing. If the NSF charge was an honest mistake and an isolated incident, you might have better odds of getting your bank to waive the fee.

Consequences of NSF charges

The impact of an NSF charge can vary. Sometimes, the financial institution may attempt to fund the attempted transaction with money from another linked account, such as your savings. 

In other cases, a cheque may be classified as bounced or dishonoured, which can cause legal trouble. If you write a cheque or make a payment that you know you don’t have the funds to cover, you could face criminal charges for cheque fraud.

Do NSF fees affect your credit?

NSF charges can negatively impact your credit score through indirect means. While bounced cheques are not reported to credit bureaus, insufficient funds can cause late or missed payments, which can be reported. In addition, unpaid debt may be sent to collections and will appear on your credit report. If you consistently don’t have enough money in your account to pay your obligations, you may appear as a credit risk to lenders, which could lower your chances of being approved for a credit card or qualifying for loans.

NSF fees versus overdraft fees

NSF fees and overdraft fees are penalties for overdrawing your account. But which fee you’re charged depends on whether you have overdraft protection.

If you don’t have overdraft protection on your account, you’ll be charged an NSF fee every time you try to make a payment you can’t cover with your account funds. If you’ve opted into overdraft protection, you’ll avoid NSF fees but pay overdraft fees plus interest on the amount you overdraw.

What is overdraft protection?

Overdraft protection is a line of credit — typically up to $5,000 — that extends your account balance past what’s actually there by whatever amount you apply and qualify for. It protects your account from the consequences of being overdrawn by ensuring payments still go through.

If you happen to overdraft, your account will have a negative balance, and you will be charged daily interest at about 21% per annum until you repay the overdrawn amount.

Depending on the type of overdraft protection plan you choose from your bank, you will be charged a per-use or per-month rate for overdraft protection in addition to interest on overdrawn balances. The fee is most commonly $5 per use or per month.

If you only dip into overdraft occasionally, then overdraft protection may not be worth the added cost. But this protection may be valuable if you regularly overdraw your account.

5 ways to avoid NSF charges

Avoid NSF fees with the following tips:

  1. Sign up for overdraft protection. Avoid NSF charges by signing up for overdraft protection through your financial institution.
  2. Monitor your bank account balances. Know how much money you have in your bank accounts by checking your balance regularly. This information can help you avoid overspending. 
  3. Track your spending. Stay accountable by creating a budget to monitor your spending habits.
  4. Set up alerts for low balances. Many banks allow customers to set up automated alerts once certain account balances or spending thresholds are met. These alerts can help you make informed spending decisions.  
  5. Use a prepaid card. It’s impossible to overdraw a prepaid card because you’re limited to the funds loaded onto the card — which means you can’t incur any NSF fees.

Frequently asked questions about NSF fees

How will I know if I’ve been charged an NSF fee?

NSF fees may appear on transaction receipts or as a transaction description on your online or paper bank statement. It may take one to two business days for the fee to appear after the account has been overdrawn.

Are NSF fees refundable? 

You may be able to get an NSF fee refunded by asking your bank to reverse the charge. Whether or not your bank complies largely depends on the financial institution and your account history.

About the Authors

Aaron Broverman

Aaron Broverman has been a personal finance journalist for over a decade. His work has appeared on such outlets as Yahoo Finance Canada, Bankrate and Creditcards.com, Money Under 30, Wealth Rocket, CBC.ca and Greedyrates.ca. This former Toronto transplant via Vancouver now lives in Waterloo with his wife and son.

Shannon Terrell

Shannon Terrell is a lead writer and spokesperson for NerdWallet, where she writes about a variety of personal finance topics. Previously, she was a writer, editor and video host for financial comparison company, Finder. Shannon has appeared as a financial expert on CP24 and has been quoted in numerous publications, including Yahoo! Finance and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. She’s also a published author whose work has been featured in academic journals from the University of Toronto. Shannon is based in Brampton, Ontario.

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