NSF Fees and Overdraft Fees Explained: What These Bank Charges Mean, and How to Avoid Them

Unexpected bank fees can quickly eat away at your bank balance. If you’ve ever been hit by an NSF fee or overdraft charge, you’re not alone. Understanding what these fees are, why they happen, and how to avoid them can help you feel more in control of your money — and keep more of it in your pocket. 

Why do banks charge fees to customers? 

Banks provide services that require systems, staff, and security. Fees help cover these operating costs. But they also serve another purpose: encouraging customers to manage their accounts responsibly. 

Two of the most common penalties people run into are NSF fees and overdraft fees. These charges are related to not having enough money in your account to cover a transaction. But they aren’t the same — and understanding the difference is key. 

What is an NSF fee? 

NSF stands for "nonsufficient funds." An NSF fee is charged when a payment is rejected because there isn't enough money in your account to cover it. 

Since 2023, nearly two-thirds of large banks have eliminated NSF fees, resulting in significant savings each year for their customers. 

Here’s how it works: You write a check or authorize an ACH payment, but your account balance is too low. Your bank refuses the transaction and charges you an NSF fee as a penalty. 

NSF fees can happen in any of the following scenarios: 

• Writing a check without enough funds to cover it
• Automatic payments that hit your account when your balance is low
• Attempting to make a debit card purchase without overdraft protection 

Some banks may also charge a returned item fee to the merchant, which can make a single mistake even more costly. 

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How much are NSF fees? 

NSF fees typically range from $25 to $35 per returned transaction. If multiple payments are declined due to insufficient funds, your bank may charge a separate NSF fee for each item. 

While most large banks have eliminated NSF fees to stay competitive and respond to consumer pressure, there are still many banks that charge them. Review your bank’s fee policy carefully so you’re aware of potential charges — and can take steps to avoid them. 

What is an overdraft fee? 

An overdraft fee is charged when your bank allows a transaction to go through even though your account doesn’t have enough money to cover it. Instead of rejecting the transaction like with an NSF, the bank pays it — then charges you a fee for covering the difference. 

This might sound helpful, but it can add up quickly if you’re not careful. 

Common causes of overdraft fees include: 

• Using your debit card for a purchase that exceeds your balance
• Automatic bill payments
• ATM withdrawals that overdraw your account 

Some banks also charge daily overdraft fees until the negative balance is resolved. 

How much do overdraft fees cost? 

Overdraft fees typically range from $30 to $35 per transaction. If you make multiple purchases while your account is overdrawn, you could be charged a separate fee for each one. 

In December 2024, the Consumer Financial Protection Bureau finalized a rule requiring a $5 cap for overdraft fees. The rule faced major opposition from the banking industry, and in April 2025, Congress overturned the CFPB’s cap on overdraft fees. 

In recent years, some banks have reduced these fees or eliminated them entirely, but many still charge them. It's important to read your bank's fee schedule to understand what you could be charged — and how to avoid it. 

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NSF fees vs. overdraft fees Both NSF fees and overdraft fees result from not having enough money in your account. But the key difference is what the bank does with the transaction. Here’s a side-by-side comparison of NSF and overdraft fees: 

Bank fees can be frustrating, but understanding how they work is the first step toward avoiding them. Luckily, you can take simple steps to protect your account and your money against being hit with unexpected NSF and overdraft charges. 

In 2024, Americans paid an estimated $12.1 billion in overdraft and NSF fees, averaging $367 per household. Because 80% of all NSF and overdraft fees are paid by 9% of consumers with more than 10 overdrafts a year, this figure is much higher for affected households. 

How to avoid being charged an NSF fee 

Avoiding NSF fees starts with account awareness and proactive money management. Here are a few simple ways to stay ahead: 

• Monitor your account with alerts: Use your bank’s mobile app to set up low balance alerts to track your account and notify you when your balance drops below a certain amount.
• Schedule payments strategically: Plan automatic payments around your paydays to reduce risk.
• Write checks carefully: Keep your records up to date and always double-check your balance before writing a check. If funds are low, consider using a different payment method to avoid fees.
• Keep a small buffer: Even $50–$100 in your account can help protect you from accidental shortfalls.
• Consider overdraft protection: Linking your checking account to a savings account or line of credit may allow transactions to go through and prevent returned payments — but you may still incur overdraft fees. 

How to avoid an overdraft fee 

While overdraft fees can feel unavoidable at times, there are practical steps you can take to prevent them: 

• Set up overdraft protection: Link your checking account to a savings account or credit card to cover shortfalls automatically.
• Track your spending: Keep an eye on recurring charges, subscriptions, and pending transactions that could push your balance below zero.
• Use banking alerts: Many apps let you set alerts when your account is nearing a low balance.
• Review your bank’s overdraft policy: Some banks offer grace periods, overdraft cushions, or don’t charge fees at all. Knowing your bank’s rules can help you make better decisions.
• Budget for the week: If you get paid biweekly or monthly, break down your available balance by week to avoid overspending. 

Staying on top of your daily balance and planning ahead for recurring expenses can make a big difference in avoiding surprise charges. 

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Can you get bank fees waived? 

Yes — in some cases, you may be able to get NSF fees or overdraft fees refunded. 

Here’s how: 

1. Act quickly: Contact your bank as soon as you notice the charge.
2. Be polite but firm: Explain the situation and ask if the fee can be waived as a one-time courtesy.
3. Show your record: If you rarely incur fees, mention your good account history. 

Many banks will refund at least one fee per year if you ask — especially if it’s your first offense. It never hurts to reach out. 

Pro tip: Setting up overdraft protection — such as linking your checking account to a savings account — can help you avoid future charges altogether. 

NSF and overdraft fees can quickly derail a tight budget for households already living paycheck to paycheck. The good news is that you can avoid NSF fees and overdraft fees with a few simple habits and account management tools.