Unavailable funds fee

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[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