Unavailable funds fee
From Wikipedia, the free encyclopedia
 |
The examples and perspective in this article or section may not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page. |
[edit] Overview
The unavailable funds fee (also known as "NSF Fee") is a fee that results from a transaction that posts to a negative available balance as applied to a Demand Deposit Account; usually a checking or a savings account. The fee is typically applied at the end of the business day that it occurred though some financial institutions apply it as soon as a transaction is processed. Unavailable funds fees are account for a significant portion of a typical banks income.[1] To understand how an "unavailable funds fee" comes to be, it is very important to understand the following 3 parts of a checking account:
Posted Balance
Available Balance
Holds
The Posted Balance
The "posted balance" is money that has physically been put in or taken out of the personal account. This balance is the result of a transaction that has a date in the past. This is the actual or the "real balance" of the money in the account.
The Available Balance
The "available balance" is the "posted balance" minus the total of the "holds" that have that date, for example use this sample from an imaginary account with an opening balance of $100.00 In this example only $20.00 has physically left the account, but for some reason $10.00 is on hold.
| date | serial # | description | amount | posted | HOLDS | available |
| 01-01-06 | Open | $100.00 | $10.00 | $90.00 | ||
| 01-01-06 | DBC | gas | $5.00 | $95.00 | $10.00 | $85.00 |
| 01-01-06 | 1001 | check | $15.00 | $80.00 | $10.00 | $70.00 |
The Hold
A "hold" is money that the bank has either chosen or is not allowed to make available to the customer. "holds" originate from deposits, notice of returns, notice of collection, and most common are check cards/debit cards (aka: DBC) purchases. A "hold" is assigned a dollar value and a time frame, a number most often from 1 to 14 days. Holds are not permanent and may disappear and reappear. After the hold time it will usually become a "posted transaction", but may disappear. At this point, when the transaction posts it can generate a fee. Here is an example of holds over a period of time
| date | value | 01-01-06 | 01-02-06 | 01-03-06 | 01-04-06 | 01-05-06 | 01-06-06 | 01-07-06 |
| deposit | +$100.00 | $100.00 | $100.00 | $100.00 | ||||
| DBC gas | -$10.00 | $10.00 | $10.00 | $10.00 | ||||
| DBC music | -$15.00 | $15.00 | $15.00 | $15.00 | ||||
| DBC food | -$25.00 | $25.00 | $25.00 | $25.00 | ||||
| DBC Phone | -$15.00 | $15.00 | $15.00 | $15.00 | ||||
| DBC net | -$35.01 | $35.01 | $35.01 | $35.01 | ||||
| total | -$00.01 | -$100.00 | -$110.00 | -$175.01 | -$100.01 | -$90.01 | -$25.00 |
In action
Note that in this example the customer has over spent by one penny, but has generated 4 extra fees. the average overspending fee is about $30.00. These fees occur when a transaction post to the account and the available balance is negative. In this example there is a standard deposit hold, but has no effect on generating fees.
| date | Balance | amount | new balance | HOLDS | available | FEE Caused | |
| 01-01-06 | +$100.00 | deposit | $100.00 | ||||
| 01-02-06 | $100.00 | ||||||
| 01-03-06 | $100.00 | ||||||
| 01-04-06 | $100.00 | ||||||
| 01-05-06 | $100.00 | ||||||
| 01-05-06 | $100.00 | -$10.00 | gas | $90.00 | -$90.01 | -$00.01 | unavailable |
| 01-05-06 | $90.00 | -$30.00 | fee | $60.00 | |||
| 01-06-06 | $60.00 | ||||||
| 01-06-06 | $60.00 | -$35.01 | net | $24.99 | -$25.00 | $-0.01 | unavailable |
| 01-06-06 | $24.99 | -$15.00 | phone | $9.99 | -$25.00 | -$15.01 | unavailable |
| 01-06-06 | $9.99 | -$15.00 | music | -$5.01 | -$25.00 | -$00.01 | overdraft |
| 01-06-06 | $-5.01 | -$30.00 | fee | -$35.01 | |||
| 01-06-06 | -$35.01 | -$30.00 | fee | -$65.01 | |||
| 01-06-06 | -$65.01 | -$30.00 | fee | -$95.01 | |||
| 01-07-06 | $-95.01 | ||||||
| 01-07-06 | -$95.01 | -$25.00 | food | -$120.01 | $0.00 | -$120.01 | overdraft |
| 01-07-06 | -$120.01 | -$30.00 | fee | -$150.01 |
[edit] See also
[edit] External Links
- ^ USA Today-Rising bank fees hit consumers
USA Today: Rising bank fees hit consumers
 |
This economics or finance-related article is a stub. You can help Wikipedia by expanding it. |
