You ought to have that money on hand when you make a payment from your checking account. If the money isn't already in your account when you write a check, use your debit card, or conduct an electronic funds transfer, your bank may reject the transaction on the grounds that there aren't enough funds.
How Should I Interpret "Insufficient Funds"?
When there is not enough money in your account to cover a payment, it is known as having "insufficient funds" in the banking industry. Let's take the scenario where you pay your electric company's bill by check or enroll in automatic bill payment. The bank compares the number of funds you have and the amount you owe on the payment before the payment reaches your account (either because your biller pulls the funds or because the bank deposits your check). If the bank determines you don't have enough money to cover it, the biller won't be paid, and no money will leave your account. The phrases "payment rejection," "bounced check," "overdrawn account," and "non-sufficient funds" (NSF) may also be used to describe accounts that do not have enough funds to cover payments.How Overdrawn Situations Affect You
Your bank may merely refuse the transaction if you don't have enough funds in your account to cover it. But there are other possibilities as well: Fees add up: Your bank will charge you a fee for having insufficient funds, typically between $27 and $35. You'll probably also be charged a fee by whoever you tried to pay. A company that deposits your bounced check will incur fees from their bank, which they will then pass along to you. For declined electronic payments, there is frequently a fee. Additionally, those fees really start to add up if you bounce several checks in a row. Your reputation has been ruined. Banks do not like it when customers overdraw their accounts (even though those customers generate a lot of revenue). In databases that track clients with a history of writing bad checks, your name might appear if you routinely overdraw your account. In the future, opening a bank account might be a more difficult result. Your account might even be closed by your bank. Legal and credit issues: Unpaid bills may be collected and result in future issues for you. Suppose you routinely overdraw your account without using overdraft protection. In that case, it may eventually lower your credit scores, and you may even run into legal issues if it appears that you are deliberately spending more than you can afford.How to Reduce or Avoid NSF Charges
If your funds are low, one of the many overdraft protection programs that banks offer will cover your payment.Overdraft Security
When you have overdraft protection, your bank will honor transactions rather than reject them—but they will charge you about $35 each time. Additionally, you still need to replenish those funds quickly. You must choose to use overdraft protection if you want it on your checking account, and it's not always a good idea. If you choose to participate, you give your bank permission to process all transactions regardless of your financial ability and charge you fees each time you go overdrawn. If you choose not to participate, any attempts to make an unaffordable payment will result in your debit card being declined at the register. After that, you can decide whether to pay with cash, a different card, or nothing at all.Request a Fee Waiver from the Bank
Even if you are only a few cents short of what is owed, your bank is permitted to charge you the full overdraft fee. Consider calling your bank and asking them to waive the fee if you've been a great customer and rarely if ever, overdraw your account. Maybe a sympathetic customer service agent will answer the phone and be willing to help.Overdraft Credit Line
You can apply for an overdraft line of credit if you don't want to pay high overdraft fees but are still concerned about the occasions when you might unintentionally spend more money than you have. These credit lines are less expensive than overdraft fees for individual items. Instead of paying a flat fee, you will be charged interest on the sum you "borrow," which is usually less than the fee.Connect your savings and checking accounts
Connecting a savings account to your checking account is another way to avoid paying the more expensive overdraft fees. Your bank will take money from savings if you go overdrawn. With this option, there may still be a flat fee, but it will typically be less—around $10—than conventional overdraft fees. Consult your bank about the specifics.Create Alerts Through Your Bank
Be aware that even if you choose not to enroll in overdraft protection, your bank may still permit payments to be processed when you run out of money (and charge you insufficient funds fees). Even if you've instructed your bank to reject transactions when you run out of money, automatic recurring payments like utility bills or insurance premiums will probably still be made. Consider setting up alerts or texts with your bank so that you are informed prior to the completion of these transactions, giving you the opportunity to deposit funds into your account or reverse the transaction.Maintain Your Balance
By regularly checking and balancing your account, you can determine how much money you have available. If you keep tabs on your balance, any upcoming automatic payments, any holds on your account, and any freezes or holds, you'll be aware of how much you can spend even before your bank does. Reviewing transactions frequently will help you identify fraud early on.Questions and Answers (FAQs)
How can you get cash if you don't have enough money to use an ATM?
You typically need at least $20 in addition to any fees to withdraw money from an ATM. If you don't have that much, you'll need to use another strategy, like receiving cash back after using your debit card to make a purchase. You can also ask a teller at a bank branch to withdraw the precise amount you require when you are there in person.How can an overdraft fee be reimbursed?
Fees for overdrafts might be negotiated. Asking for a refund is not harmful. The likelihood of the bank refunding you may increase if it believes you to be a loyal customer who merely made a mistake.