Disputing NSF Charges

Hi everyone, and welcome back to Melissa Making Cents!

As a CERTIFIED FINANCIAL PLANNER™ and a financial coach, I often talk to clients about what they enjoy and what they don't enjoy about their financial institutions. One of the more common topics brought up (about not enjoying their financial institution) is NSF charges and overdraft fees. This makes tons of sense; of course, why would anyone want NSF charges? They're annoying, and they often make a problem worse. 

For those of us who may be unfamiliar, an NSF charge is a non-sufficient funds charge. According to Credit Karma, "Banks and credit unions charge non sufficient funds, or NSF, fees when you don't have enough money in your account to process a transaction." These are slightly different from overdraft fees, which are fees charged when a bank allows you to carry out a transaction that your account doesn't have the funds for. The critical difference in most people's minds is that an NSF charge cancels a purchase or check and charges you a fee. In contrast, an overdraft fee allows you to make the purchase or write that check, and you owe the bank the remainder of the charged transaction and the fee. Often these fees are the same amount and are talked about interchangeably. For the rest of this post, I'll be talking about non-sufficient funds fees; however, much of the information provided can be applied to overdraft fees as well. 

One of the worst parts about NSF fees and overdraft fees is that they can add fuel to the fire. An NSF fee can cause a negative balance in some scenarios, which can spur an overdraft fee or additional NSF charge. Depending on your bank, for every increment of time these fees go unpaid, you may be charged additional fees while you're making attempts to rectify your balance. For those who have limited income, this is a nightmare scenario. Still, there are steps you may be able to take to dispute NSF charges or avoid them entirely.

How you Acquire NSF Fees

Let's start by going over some scenarios that may cause you to acquire an NSF fee. These are general examples, but each bank has its own specific policies, which you should be familiar with. 

One of the most common reasons for acquiring an NSF charge is online shopping in this day and age. Some websites charge for purchases immediately when you click "buy," some don't charge your account until an item is shipped (like Amazon). For customers, this can cause some chaos when taking a glance at their bank account. While you may believe you have enough money in your account to make a purchase, if a company doesn't charge until your item ships, your balance could drop hundreds of dollars unexpectedly overnight. If you've depleted your account balance in the meantime, you may be hit with an NSF charge when your other orders ship. 

Checks are another common cause of NSF fees. We really aren't used to balancing our checkbooks in the digital banking age, leading to significant issues. While you may have money in your account when you write a check, you may be hit with an NSF fee when someone cashes a check you've written if you aren't careful.

Unfortunately, there are other ways you may acquire an NSF fee that isn't necessarily your fault. For example, I have a friend who deposited a paycheck from their employer. My friend went about their everyday life - paying bills, making purchases, and buying coffee to get a notification that they had an NSF charge. Thinking it was strange, they went to check their account, and to their surprise, their account was in the red to the tune of about one thousand dollars. Their employer, unbeknownst to them, was going under and wrote bad checks, which bounced. This just goes to show that NSF charges aren't always your fault, and they can happen to anyone given the right (or wrong) circumstances. 

Do We Have to Accept NSF?

With all of this in mind, we ask ourselves, "Do we have to accept NSF Fees"? 

This is a wishy-washy answer, but maybe. While legally, we have to accept NSF fees, which our bank outlines for us on a fee schedule when we open our account, we can also dispute them. Doing this is actually really simple and straightforward too! 

To dispute an NSF charge, first, collect your thoughts. It can be confusing, disorienting, and frustrating to see that your account has been charged. Before you make contact with your bank, be sure you're calm and collected and have an idea of what you're going to say. Next, contact your bank's customer service. This can be done over email but is usually most effective if you get a representative on the phone or in person. Lastly, calmly explain why you received an NSF charge, explain why you don't think it's fair, or what outside circumstances might have led to acquiring it. I'm not advocating that you unfairly manipulate your bank. Still, they're people too, and if they understand where you're coming from, they may be willing to work with you. In fact, you'd be surprised how often and easily you may be able to get NSF charges and overdraft fees removed just by doing this. Especially if it's not a common occurrence!

How to Avoid NSF Fees in the First Place

While it can be relatively easy to dispute an NSF charge, it won't always be successful. The best way to avoid NSF charges is to avoid getting one in the first place. Here's a small collection of helpful tips that can help you avoid that pesky NSF or overdraft charge, so you don't have to leave your fate up to a customer service representative.

First, start by having a small cushion in your bank account. This is the most obvious step, but avoid spending when you're close to the margins and keep at least a small cushion of "spare cash" in your account if anything you forgot about auto charges your account. Next, familiarize yourself with the fee schedule of your bank. Your fee schedule is given to you (by law) when you open your account, but it can also be found on your bank's website or given to you in person at a branch. Also, don't be afraid to get a little high-tech. Set up notifications for a low balance (if that's an option) and link your savings account to your checking account. Lastly, set up overdraft protection with your bank!

Side note: if you link your savings and checking accounts, be sure that you're keeping an eye on your balance. You don't want to eat through your savings account by overspending money you don't have in your checking account. 

Apps and Companies that Dispute Overdraft and NSF Fees for You

First of all, most companies charge you annually or monthly to check your account for NSF charges or overdraft fees and dispute them for you. Personally, I would recommend against adding more expenses to dispute bank charges. Outside of that, these companies often take weeks or months to gather "evidence" and information to dispute a few changes at a time. Many companies that offer this service also limit the number of charges they'll dispute for you annually, monthly or quarterly. To top it off, often, these companies have a lower success rate of successfully fighting charges than you would by calling or going in person to your bank.

However, perhaps the most important thing to keep in mind is that these businesses are making a profit by your inaction. They aren't doing anything that you can't do, and they're not as successful as individuals who dispute their own NSF charges. Instead of paying a company to dispute charges, just follow the steps I've listed above and do it yourself. You'll be more successful and keep your money. 

Disputing NSF or overdraft fees isn't rocket science. However, if you or a loved one needs more guidance on dealing with your bank, please, feel free to call or email to schedule an appointment with me. Together we can create a financial plan that helps you become financially sound and avoid NSF charges altogether. 

Until next time...this is Melissa Making Cents!

Melissa Anne Cox, CERTIFIED FINANCIAL PLANNER™, is also a College Planning and Student Loan Advisor and Financial Coach in Dallas, Texas.