- Non-Sufficient Funds - NSF
An acronym used in the banking industry to signify that there are "non-sufficient funds" in an account in order to honor a check drawn on that account. Colloquially, this is known as a "bounced check" or "bad check".
Banks normally charge a fee to the account holder for an NSF check. Depending on the bank's judgment, it may choose to honor the check, leaving the account holder with a deficit balance, or it may choose to refuse payment and return the check to the depositor.
The fees charged by many banks in instances of NSF checks are generally contentious among consumers. Consumer advocates allege that since overdraft fees are usually a fixed amount, a customer may, in effect, be paying extraordinarily high interest rates for relatively small deficits in their accounts.
Bank customers should seek to avoid these fees by keeping an extra amount of cash in their checking accounts so that they do not overdraft their accounts accidentally. In addition, customers should carefully monitor the use of checks, debit cards and automated charges, which are common causes of overdrafts.
Investment dictionary. Academic. 2012.
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