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NSF fees: What they are, how they work and how to avoid them

Simple tips and tools to track your balance can help you make sure you have enough to cover your transactions.

Oct. 07, 2022 3-minute read

Whether paying a monthly bill or writing a cheque, from time to time you may accidentally try to spend more than you have in your account. To help you avoid a non-sufficient funds (NSF) fee, there are practical ways to make sure you have enough funds to cover your transactions and keep your balance on the plus side.

What is an NSF fee?

You may be charged an NSF fee if you don't have enough funds available to cover a transaction. A common example is if you have a monthly pre-authorized bill and forget to deposit money into your account to cover the charge. Or you write a cheque and the recipient doesn't cash your cheque immediately. If you forget about that cheque and your account doesn't have enough funds to cover it when the recipient cashes it, the bank may reject the cheque and charge your account an NSF fee.

How will I know if I've been charged an NSF fee?

NSF fees are charged immediately when there aren't enough funds to cover a transaction, but you may not find it on your online banking record for another 1 to 2 business days.

3 tips to help you avoid NSF fees

Setting up some simple precautions can help you keep track of the money going in and out of your account. Here are a few tips:

1. Track your spending

Reviewing your account activity and scheduled payments regularly is one of the best ways to stay up to date on your transactions. Making sure that you have enough funds in your account to meet your financial obligations will help you avoid going into a negative balance.

2. Use balance alerts

Automatic alerts let you know when your account balance is below a certain amount. It's like a digital nudge to remind you to deposit money into your account to avoid an NSF fee. Learn more about how to set up automatic alerts:

3. Get overdraft protection

Overdraft protection is an optional service which you can apply for. It helps you cover your transactions up to an approved limit if you don't have enough money in your bank account to complete a transaction. This can help you avoid an NSF fee, but it's important to remember that there's a limit to the amount of overdraft protection you have. Learn more about overdraft protection.

A graph with overdraft protection and pre-authorized bills. The overdraft limit is $500 and the two pre-authorized bills are for $400 and $1,000.

Let's say you have an overdraft limit of $500. You have two pre-authorized bills that come out of your account: one for $400 and another for $1,000.

The $400 bill is paid and covered by your overdraft protection, and you are charged an overdraft fee plus interest on the overdraft amount. In the case of the $1,000 bill, your overdraft limit is too low to cover the expense and you may be charged an NSF fee.

Keep in mind that overdraft protection is a good safety cushion for the occasional time when you go over your account balance, but being in overdraft regularly may become costly because interest is charged on the overdrawn amount (as well as the overdraft fees).

Set yourself up for success

Keep tabs on your bank balance with easy tracking tools and tips — you'll avoid NSF fees and create good money habits that will help you in the long term.

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NSF fees: What they are, how they work and how to avoid them

What is an NSF fee?

How will I know if I've been charged an NSF fee?

3 tips to help you avoid NSF fees

1. Track your spending

2. Use balance alerts

3. Get overdraft protection

Set yourself up for success

Need some financial advice?

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