when a check is written and deposited by the payee their financial institution must make the funds available to them within two business days after they make the deposit if funds are not available from the payer s bank account it is deemed as insufficient and an nsf fee is assessed 
banks provide account holders with several options to avoid the penalties associated with an insufficient funds transaction customers can opt out of overdraft policies that allow the bank to cover charges and add an nsf fee or link at least one backup account such as a savings account or credit card to fund the insufficient account in 2023 the cfpb issued a report saying it found numerous financial institutions charging multiple nsf fees for the same transaction potentially as soon as the next day while this is not illegal the cfpb said that consumers could not reasonably avoid the penalties for which some institutions reaped millions of dollars in fees and that the fees weren t justified by benefits to consumers or competition as a result nearly all of the banks and credit unions the cfpb engaged with provided plans to stop charging nsf fees altogether 2nsf fees vs overdraft feesnon sufficient funds and overdrafts are two distinct bank transactions both relate to insufficient funds and can trigger fees banks charge nsf fees when they return presented payments without payment like a check and overdraft fees when they accept and pay the checks that overdraw checking accounts a customer with 100 in a checking account may initiate an automated clearing house ach or electronic check payment for a purchase in the amount of 120 if the bank refuses to pay the check an nsf fee is incurred if the bank accepts the check and pays the seller the checking account balance falls to 20 and incurs an overdraft od fee overdraft protection is often an option for banking customers if a customer has 20 in a checking account and attempts to make a 40 purchase with a debit or check card and has not opted in to the bank s overdraft plan the transaction will be declined by the retailer if the customer has od protection the transaction may be accepted and the bank may assess an od fee however if the customer wrote a check for the 40 transaction the bank may honor it and assess an od fee or reject it and assess an nsf fee regardless of whether or not the customer has joined the overdraft program 