Avoiding Non-Sufficient Fund and Overdraft Fees
Non-sufficient fund fees, more commonly known as NSF fees, happen when your checking account does not have enough money for a purchase or payment you try to make. Overdraft fees are similar, but they occur when the bank allows a transaction to go through, despite your account balance not being sufficient to cover it. The bank will charge you the overdraft fee, plus you have to pay the deficit balance.
Both types of fees can be costly, coming in as high as $35 each. These charges can add up, especially if you overdraft your account frequently.
Best practices to avoid NSF and overdraft fees
- Use direct deposit as a way of getting your paychecks into your checking account faster.
- Keep track of the balance in your checking account. It may seem old-fashioned to keep a checkbook register, but this is the best way for you to know exactly how much money you have available at any given time. Then check your balance before making a purchase or writing a check to ensure you have enough money to cover it.
- Use available overdraft protections , such as linking your checking account to a savings account you have at the bank. Your bank can transfer money from your savings account to your checking account to cover a purchase and charge you a smaller fee.
- Do not use your debit card to rent a car, buy gas, or check into a hotel. Each of these merchants will often place a hold on your account for an amount far larger than you actually end up spending. The hold may cause you to overdraw your account accidentally.
- Keep a buffer in your checking account all the time. Even just keeping a minimum $100 account balance will prevent you from triggering an overdraft when you spend a little more than you planned. Just be sure to think of the last $100 as unavailable.
- Set up an alert so your bank will notify you if your checking account balance falls below a specified amount. If you receive the notifications on your phone, you can instantly adjust your spending to avoid making an overdraft on your account and incurring a fee.
- Carefully manage joint accounts and consider separate accounts if you cannot coordinate your spending habits.
- If you do trigger an overdraft, deposit money into your account as soon as possible to pay the fee and get a positive balance again. Some banks may charge you an additional fee for each day your balance is negative, or another large fee if your account has a negative balance for several days in a row after an overdraft.