An NSF fee, or non-sufficient funds fee, is a penalty charged by banks when an account does not have enough money to cover a payment. This can happen when a check bounces or when an electronic payment is denied due to insufficient funds in the account. The average NSF fee is $19.94, according to Bankrates 2023 checking account and ATM fee study. The fee is charged to cover the cost and inconvenience of having to return declined checks. NSF fees are often significant, with the average fee being $34 according to the Consumer Financial Protection Bureau.

NSF fees are different from overdraft fees, which are charged when a bank covers a transaction that exceeds the account balance. Overdraft fees are charged when transactions are allowed to clear, while NSF fees are levied when theyre denied. Consumers can avoid NSF fees by opting for overdraft protection through their banks.

Its worth noting that some banks have eliminated or reduced NSF fees, but theyre still commonly charged. In fact, 70 percent of accounts still charge these fees, according to Bankrate. To avoid NSF fees, consumers can opt-in to overdraft protection if their bank offers it, or they can monitor their account balance closely to ensure they have enough funds to cover their transactions.