How Non Sufficient Funds And Overdraft Fees Affect American Households

Fact Checked Fact Checked Published: Jan 10, 2024, 6:02pm Banks and credit unions are slowly eliminating non sufficient funds (NSF) and overdraft fees, but many Americans still pay them—even when they don’t expect to. The Consumer Financial Protection Bureau recently published a report showing how families are affected by overdraft and NSF fees.

In the CFPB report, almost half of households surveyed (43%) were surprised by their most recent . While others thought a fee might be charged when their balances went into the red, only 22% expected one. Whether or not consumers anticipate overdraft fees may be influenced by how often they’re charged and the annual income they earn.

Most households (56%) charged over 10 overdraft fees in the last year expected their most recent overdraft, compared to just 15% of households charged between one and three overdraft fees during the same time. Around one third of households (34%) making less than $65,000 were charged an NSF or overdraft fee in the previous year.

Only 10% of households earning over $175,000 annually were charged these fees. The report also showed that NSF and overdraft fees are closely linked, and households that pay one are more likely to pay the other. What Are Overdraft Fees? An occurs when you overdraw your checking account or spend more than you have.

A bank charges this fee when it covers you for a debit or ATM transaction that results in a negative balance. You must opt into overdraft services to be charged overdraft fees. Otherwise, overdrafts are generally declined, or a bank may cover them up to a certain limit penalty free. Overdraft protection often lets you link another checking or savings account to your checking account to cover overcharges.

Necessary funds are then transferred automatically as needed. There may be overdraft transfer fees for this service, but they’re often lower than overdraft fees. What Are Non Sufficient Funds Fees? A , also known as an insufficient funds fee, is charged when you don’t have enough money to cover a transaction and the transaction is declined or returned.

For example, if you write someone a check that can’t be cashed and the check is returned unpaid, you may be charged a non sufficient funds fee. NSF fees can also be charged on debit and ACH payments. If you haven’t opted into overdraft coverage and you make a transaction that declines, you may pay an NSF fee.

can’t both be charged on the same transaction. How To Avoid NSF and Overdraft Fees Avoiding surprise NSF and overdraft fees can help you save money when you might need it most. To prevent unwanted charges from adding up, implement some of these tips. Best Budgeting Apps Of 2024 Find an app that’s well suited for you and your needs.