We all dread a low account balance. And it is daunting to avoid depleting funds in your account as long as you keep transacting. The situation of trying to withdraw money or make transactions above your current account balance is not a pleasant one. Not to mention incurring the NSF fee charged by the bank. Sadly, very few individuals have sufficient information about the situation of non-sufficient funds. Let alone understanding what it means and how to take cover. Here is a clear explanation of how NSF works and how to beat the unpleasant NSF fee.
What are non-sufficient funds(NFS)?
When a checking account does not have enough money for transactions, such an account is in the non-sufficient fund’s state (NSF). Similarly, the NSF fee is also used to describe the fee charged to such an account with an insufficient balance.
An example to explain non-sufficient funds and NSF fee
So you intend to buy a washing machine worth $1000. But you only have $800 as your balance. Unaware, you proceed with the purchase and write a check for $1000 to the store owner. The resulting situation is your check was returned to you and stamped with NSF. In addition, your bank deducts $35 from your account as an NSF fee for a penalty.
It means that your bank did not honor your check because you had a balance below the amount you intend to draw.
This situation or status of your bank account on $800 against the $1000 you want to draw is called non-sufficient funds. And the NSF fee issued after is a penalty for attempting to overdraw.
Non-sufficient funds and why they matter
It is unlikely that individuals intentionally want to blow their accounts or deplete their funds. Therefore situations of non-sufficient funds are inadvertent. However, this error of attempting to overdraw is not without grave consequences, hence the NSF fee. In the United states, a penalty for the attempted overdraw is $27 – $35. Also, in most states, the consequences for overdrawing vary and depend on the laws that apply there. There are controversial statements that banks make a lot of money from charging an NSF fee. However, it does not stop the charges from coming if you overdraw.
Why do people have non-sufficient funds?
To understand why people have non-sufficient funds is to know what causes non-sufficient funds. As a business owner, you could incur non-sufficient funds when you use debit cards, issue checks, or make a direct deposit.
Automatic withdrawals are the most frequent cause of non-sufficient funds. Because, in today’s competitive business world, most entrepreneurs automate as many business processes as they can. And the payment is not exempted from the automatic business process. Additionally, automatic withdrawals are also another frequent contributing factor to non-sufficient funds. The reason is that they are easy to set up as they are easy to forget.
How to save yourself from NSF fee
Since most offenders of non-sufficient funds are not intentional and unexpected, it helps to have a backup in place to surmount it. A couple of steps and measures can save you from incurring the annoying NSF fee. As a business owner, it is healthy for your enterprise to avoid incurring non-sufficient fund fees. That is because they are expensive, especially for small business owners. Also, they are detrimental to the health and progress of your business enterprise.
There are three steps you can take to save yourself from attracting an NSF fee.
Be strict about your budget.
Being strict about your budget means that you apply personal discipline to avoid spending past a set amount. This move requires a great deal of resilience and self-will. You could decide to have a trusted person to hold you accountable or employ an accountant to restrict your expenses.
2. Keep track of your accounts/expenses regularly.
Keeping track of your account is another way to save yourself from attracting an NSF fee. By tracking your account, you are invariably monitoring your accounts, tracking your financial transactions/expenses (deposits and withdrawals/purchases).
3. Have backup cash in your account.
It is called overdraft protection, where a certain amount is kept in another account to cover up. This amount cushions the effects of non-sufficient funds on your account. This move is relevant to provide a backup of cash for the bank to draw from in such situations. Another way around this is to link up another savings account to your checking account.
How paystubsnow saves small businesses from NSF fee
Nowadays, online paystub generators like paystubsnow provide effective means for automating tracking financial records and transactions. Small businesses do not thrive with non-sufficient funds. As a result, paystubsnow enables entrepreneurs to organize their funds and keep secure documentation of their finances like online invoices, tax records, 1099, and w-2 forms.
You can never go wrong with a security system that keeps records of all financial transactions safe, significantly error-free, and handy in your email.
FAQS: what is the difference between an NSF fee and an overdraft fee?
What is the difference between an NSF fee and an overdraft fee?
Banks charge both fees concerning accounts that are low on funds or balance. The bank will charge an NSF fee when they send back a check that attempted to overdraw. And will charge an overdraft fee when they accept an overdrawn check.
Is it possible to reverse an NSF fee?
It is possible to reverse an NSF fee if and only if it is the first time. Or if it Is the first time in a long time of receiving that charge. However, you will have to either visit the bank or contact customer support and state your request for a reversal logically. You will also have to provide mitigating situations that are hard to beat and prove the news of the issued charge. A quick one might be the COVID -19 pandemic or a global economic crisis, in addition to the fact that you are receiving such a charge for the first time.
Can I refuse to pay the issued NSF fee?
If it were possible many people would not pay this penalty fee. As a result, banks are aware of the inconvenience it poses to offenders and prevent it from the outset. Thus the NSF fee is deducted automatically from your account. This deduction sends your account into a negative balance, assuming the attempted overdraw exceeds your available balance. It means that if you have a balance of $500. And have to draw $800, then you will be charged an NSF fee of $37. It follows that your account balance becomes $-37.