What is an NSF Fee? And How Much Are They Costing Your Business

Jan 27, 2022

Finding information on the costs of NSF for consumers is easy. A quick google search will find the topic covered at length. However, sourcing those same resources for business owners isn’t nearly as fruitful.
In particular, if a business wants to learn more about NSF fees and their true cost, the information is hard to find. This got us thinking about why. And we believe we found the answer.  

When it comes to merchants, the actual bottom-line costs of an NSF fee are hard to quantify and time-consuming to determine. As a result, we committed to breaking it down, sourcing the knowledge and sharing what we found out. Keep reading to learn more. 

What is an NSF fee?

An NSF check, or non-sufficient funds check, is a check or payment that is returned for nonpayment. It is all the same bad check, bounced check, and while paper checks are going out of fashion, NSF fees are not. NSF fees likely stem from automated payments or pre-authorized debits (PAD) bills in today’s world.   

A typical scenario 

  • Merchant XYZ and customer have automated monthly billing set up for the phone bill 
  • Merchant XYZ automatically processes monthly transaction 
  • Customer bank verifies if they have enough funds in the account to cover the cost of the payment required
  • An unaware customer may not realize all automated transactions taking place and not have the correct funds on the day of withdrawal, this in turn causing the bank to reject the transaction (NSF) due to insufficient funds 
  • Bank charges merchant, merchant, in turn, charges customer both the bank fee and a fee for the work involved in handling the NSF
  • The customer receives a charge from merchant XYZ and becomes frustrated with the extra charges. 
  • Merchant XYZ, still missing the original payment amount, and the subsequent bank charge initiates the same process the following month in hopes of a better outcome
  • Once payment is received, merchant XYZ  “recoups the cost” of the NSF transaction and receives adequate compensation for the work involved. 

Or do they? While this might sound like a relative win from a financial standpoint, there’s much more to consider. 

The actual cost of NSF fees: for businesses 

At the end of 2021, the Consumer Financial Protection Bureau in the US published an in-depth report on the banks’ reliance on overdraft and NSF fees. It makes for an interesting read. In fact, the report leaves no doubt change is afoot. Financial services of all kinds need to pivot and adjust as a result of the changes we have seen in both consumer behaviour and payment patterns.


The word is out. Charging NSF fees makes for bad business and unhappy customers.
For example, the Bank of America, along with many others, has started to sing a new tune when it comes to NSF fees. Many are either reducing or completely doing away with NSF and overdraft fees.

For a business owner, charging customers for NSF fees might work to their benefit financially. Yet, hitting customers with an NSF fee is not a great way to build a good brand reputation, build credibility or encourage repeat customers. B2C or B2B, the same principle applies. For example, let’s say merchant XYZ pays a contractor, landlord, or vendor with a “bad cheque.” It can put their reputation and credibility on the line.

The actual cost of NSF fees: cash flow disruptor  

Forget about the fees and possible reputation damage for the moment. Let’s talk cash flow. 

Consider the scenario illustrated above. In this case, it could take merchant XYZ six to eight weeks or more to collect the original payment and the associated bank charge. That extra lag time hits businesses where it hurts the most. Available cash flow. NSF fees cause a massive disruption to businesses with big invoices to pay on a tight budget.


Now factor in the human resource costs. Merchant XYZ accounts receivable department is doing some heavy lifting, spending valuable time and money chasing payments down weeks after the fact. Despite our digital-first world, NSFs create a significant amount of “paperwork” that gets added to a company’s workload.

End NSF fees for businesses and consumers for good

Reduce and prevent NSF fees. Process payments faster. Track transactions easily and stay on top of cash flow.


Here at VoPay, we have a solution to help. Put an end to NSF fees with visibility into a bank accounts’ available funds. Using Open Banking technology, we add a layer of data intelligence to online bank account transactions to verify them instantly and process them at a much lower transaction fee.
Find out right away if there are enough funds without sharing bank account details or introducing security risks. Contact us today to learn more.

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