If you've been trying hard to get your financial life in order, getting hit with bank fees can feel like a kick in the gut. And sometimes, these fees are simply the result of poor timing or a direct deposit that's a few days late. One of the most common bank fees is a charge for non-sufficient funds. Here's what you need to know about NSF fees and how to avoid them in the future.
What are NSF fees and why do banks charge them?
Non-sufficient funds (NSF) fees are charged when the balance of your account doesn't have enough money to cover a withdrawal, transfer, or a check you wrote. For example, you may have planned to pay a bill on your payday and already sent the check, but your company's bank draft ends up being late. When this happens, the bank can reject the payment, referred to as a bounced payment, and charge you an NSF fee.
NSF fees are generally around $30 each. And you could find yourself in a situation where you receive multiple NSF fees for the same transaction if the bank tries to reprocess it.
NSF fees vs. overdraft fees
While NSF fees may sound similar to overdraft fees, there is a critical difference between the two. An NSF fee is charged when the bank returns a payment for insufficient funds. But with an overdraft fee, the bank accepts the transaction and moves your account balance into negative territory.
Ways to avoid NSF fees
Call your bank.
If you've been charged an NSF fee, it pays to call your bank and see if they'll waive or return the fee. If you've been a reputable customer and have a good banking relationship, they may be willing to work with you on a one-off basis.
Set up a balance transfer from a savings account
If you have a checking and savings account with the same bank, you may be able to set up protection in the form of a bank transfer. That means, if a payment comes through and your checking account doesn't have money to cover it, the amount needed will be automatically transferred from your savings account. But watch out for banks that charge fees to set up this kind of overdraft protection.
Confirm your balance before writing checks.
Many NSF fees are the result of a forgotten payment. If you keep a log of all transactions or simply check your balance before writing a check, you can ensure you have adequate funds to cover it.
Keep a cash cushion.
If you're financially able, it can pay to keep a cushion of a few hundred dollars in your account. With the extra padding, your account is more likely to be able to handle a forgotten transaction.
Set notifications.
Many institutions now offer online banking where you can manage notifications. For example, you may be able to set low-balance alerts that will show up as an email or message on your phone. These alerts can give you time to transfer balances or cancel a payment if necessary.
The bottom line
NSF fees can be a hassle, especially when you get one as a result of poor timing. To avoid NSF fees, be mindful of your balance, keep a cash cushion, and set notifications to alert you of a low balance. With proper protections in place, you can eliminate the need to worry about your bank charging unnecessary NSF fees.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
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Original Source: Why Do Banks Charge NSF Fees?
