What Is a Non-Sufficient Funds Fee? How to Avoid NSF Charges
Non-sufficient funds fees (NSF fees) are charged 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 lack of funds, the bank may penalize you with an NSF fee, which typically costs anywhere between $10 and $48.
Financial institutions are in the process of lowering the NSF fees to reflect the federal $10 cap set to take effect on March 12, 2026.
Beyond the added cost, non-sufficient funds fees can impact your credit. Understanding how NSF fees work and how to prevent them can help you safeguard your account balance and financial future.
What is a NSF fee?
BACK TO TOPAn NSF fee is charged when a transaction amount exceeds your account balance and your bank rejects the transaction for non-sufficient funds. You can typically find the NSF or insufficient funds notices on transaction receipts and on bank statements.
However, if you opt for overdraft protection, your bank may approve the transaction and charge an overdraft fee instead, depending on your bank agreement.
How much are NSF fees?
NSF fees vary by financial institution. Starting March 12, 2026, an insufficient funds fee charge for most federally regulated institutions, including the Big Six banks and credit unions, will be restricted to $10. Other amendments to the Financial Consumer Protection Framework Regulations (the FCPFR) include additional measures, such as:
Limits on banks to charge no more than one NSF fee within two business days on the same account.
Restrictions on charging NSF fee on accounts short by $10 or less.
Banks may offer low-balance or payment alerts, but how and when they send them can vary by institution.
Provincial credit unions may still charge around $50. You can check your institution’s website or contact customer support to find out if your bank or credit union is lowering the NSF fee.
You may still also need to pay a returned cheque fee, which the recipient’s financial institution sometimes charges.
Can NSF fees be waived?
Yes, your bank or credit union may waive or refund an NSF fee from your account if it was an honest mistake and you request it be removed. There’s no guarantee the bank charge will be reversed, but it doesn’t hurt to ask.
Banks are more likely to refund the first occurrence of NSF fees for customers who otherwise keep their accounts in good standing. Repeated overdrafts are less likely to be waived.
Consequences of NSF fees
BACK TO TOPThe impact of an NSF fee can vary. Sometimes, the financial institution may fund the attempted transaction with money from another linked bank 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 fees 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. This pattern could lower your chances of being approved for a credit card or qualifying for bank loans.
NSF fees vs. overdraft fees
BACK TO TOPNSF fees and overdraft fees are penalties for overdrawing your account. But which fee you’re charged depends on whether you have overdraft protection.
NSF FEE | OVERDRAFT FEE | |
|---|---|---|
Causes | An account holder has no overdraft protection and makes a payment that cannot be covered with their account funds. | An account holder has overdraft protection and makes a payment that cannot be covered with their account funds, but is within the overdraft limit. |
Cost | Usually between $10 to $48 per attempt. Plus, a potential returned cheque fee. | Usually a $5 monthly or pay-per-use fee. Plus, a daily interest around 21% per annum on the overdrawn amount. |
What is overdraft protection?
Overdraft protection is a line of credit — typically up to $5,000 — that extends your account balance up to the amount you apply and qualify for.
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.
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 being charged an NSF fee
BACK TO TOPAvoid NSF fees with the following tips:
Sign up for overdraft protection. Avoid NSF fees by signing up for overdraft protection through your financial institution.
Monitor your bank account balances. Know how much money you have in your bank accounts by checking your balance regularly. This quick audit can also help you avoid overspending.
Make a budget. Stay accountable by creating a budget to monitor your spending habits and improve your overall financial health.
Set up alerts for low balances. Many banks allow customers to set up automated alerts when certain account thresholds are met. If you’re not proactively monitoring your balances, these alerts can help you make better spending decisions.
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
How will I know if I’ve been charged an NSF fee?
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?
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 depends largely on the financial institution and your account history.
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Sandra MacGregor
Siddhi Bagwe
