Legal Definitions - not sufficient funds

Not Sufficient Funds (NSF)

NSF stands for Not Sufficient Funds.

This term describes a situation where a financial institution cannot complete a payment transaction, such as cashing a check or processing an electronic debit, because the account from which the money is supposed to be drawn does not contain enough money to cover the full amount of the payment. When a payment is marked NSF, the bank will typically reject the transaction and may charge fees to both the person or entity attempting to make the payment and the person or entity attempting to receive it.

• Example 1: Personal Check for Groceries

  Maria writes a check for $150 to pay for her groceries at the supermarket. However, she forgot that her last paycheck hadn't cleared yet, leaving only $100 in her checking account. When the supermarket deposits Maria's check, her bank will return it marked NSF because there weren't sufficient funds in her account to cover the $150 payment.

• Example 2: Automatic Loan Payment

  David has his monthly car loan payment of $350 set up for automatic withdrawal from his savings account. On the payment due date, David's savings account balance is only $300 because he recently transferred some money to his checking account. When the loan company attempts to debit his account, the transaction will be rejected due to NSF, indicating that there weren't enough funds to complete the automatic payment.

• Example 3: Business Payment to a Contractor

  A small marketing firm, "Creative Campaigns LLC," issues a check for $1,200 to a freelance graphic designer for completed work. The firm's owner had just paid a large quarterly tax bill, which reduced their business checking account balance to $1,000. When the graphic designer deposits the check, the marketing firm's bank will return it with an NSF notification because the account lacks the necessary $1,200 to honor the payment.