You have probably heard the term „NSF“ or „NSF fee.“ This is a term that, once you understand how it can affect you each month, will probably make you a little bit angry. However, it is a good idea to educate yourself about what NSF stands for. Once you do, you can take steps to avoid NSF fees.
What Does NSF Stand For?
NSF stands for non-sufficient funds. This is a fee that is typically levied by a bank against any customer who writes a bad check or tries to use their debit or credit card when the checking account balance is too low to support the charge.
Another word for NSF fee is overdraft fee. NSF, or overdraft, fees can easily run up to $30 or $35 per instance. This means that, over the course of just a day or two, just three overdraft fee charges can cost you a $100 in bank fees alone.
And this is not an uncommon occurrence. That is because most debit cards are linked to overdraft protection programs. This means that the bank will allow your debit card purchase to go through, even if the checking account balance to which the card is linked is too low. The result is that on the very same day, you could unknowingly make 2, 3 or more purchases on your debit card without even being notified by the bank that your balance is too low.
An FAQ on Overdraft Fees
Here are 5 frequently-asked questions about overdraft (NSF) fees:
1. Most banks charge overdraft (NSF) fees: The vast majority of banks and credit unions charge some form of overdraft fee. This is simply a normal way of doing business for banks – and a very lucrative one for them.
2. Overdraft fees are a way of protecting the bank: In theory, the fee is justified because it protects the bank’s profits. The bank has to incur a small interest cost when it covers your overdraft for a day or more until you replenish your account’s funds. However, the fees they charge far outweigh the costs they incur, making them grossly unfair in the eyes of many consumer advocates.
3. They are also a profit center for banks: Given the large amount of revenues banks realize from these fees, they are a true profit center. Meaning: banks rely upon these fees as part of their income source.
4. You can avoid overdraft fees by taking careful measures: By checking your balance religiously or by always keeping a padding of money in your account, you can avoid these fees. However, many people find this impractical.
5. Or, you can switch to a bank that will never charge you overdraft fees: Some banks will never charge you an overdraft fee, even if you overdraw your account. If you switch to such a bank, you will never pay overdraft fees again.
The answers to these FAQs can help you save money by not paying NSF, or overdraft, fees.