What Is An Overdraft Fee? What Is An Insufficient Funds Charge?
Overdraft fees and insufficient funds charged against a checking account are used by banks to encourage proper account management. Insufficient Funds Charges are bank fees assessed against a checking account when there are not enough available funds in the account to cover a check drawn on that account or when an electronic debit hits the account. The presented check or electronic debit is usually denied by the bank and returned as an “insufficient funds” item to the presenter. Overdraft Fees are identical to insufficient funds charges except that the presented check or electronic debit is paid by the bank for the customer up to a certain dollar limit using a courtesy overdraft payment service that often comes with the checking account. The overdraft fee is the service fee the bank charges for having paid the presented check or electronic item, thus saving the customer the embarrassment of the returned item and other possible fees from the party requesting payment.
