What Are NSF Payments?

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Handling nonsufficient funds (NSF) payments accurately and efficiently helps businesses protect themselves from financial losses by minimizing the impact of unpaid transactions. Promptly addressing NSF payments through clear communication, compliant follow-up procedures and timely resolution enables recipients to recover funds and prevent further losses. Streamlined handling can also help businesses maintain strong customer relationships, reducing the likelihood of service disruptions due to incomplete payment.

At CSG Forte, our recovery solutions can help equip your business to handle NSF situations effectively. Our re-presentment options enable you to recover the funds for each NSF payment at no charge. More importantly, these automated solutions save significant time and resources, allowing you to focus more on the responsibilities that matter most for your business.

What Is an NSF Payment?

An NSF payment is a returned check or Automated Clearing House (ACH) network payment that was unable to be completed due to nonsufficient funds. This means the bank has refused to honor the payment because there isn’t enough money in the account to cover it. NSF on checks is often referred to as bad or bounced checks.

When the recipient tries to take payment, the bank will return it due to insufficient funds in the account. This situation can result in fees for both the payer and the recipient trying to collect the funds.

The Differences Between Overdraft and NSF

Anyone who has tried spending more money than what’s available in their bank account has likely been issued an overdraft charge or an NSF fee. Although many believe the two terms are interchangeable, there are some critical differences between them:

  • Overdraft fee: Banks typically charge overdraft fees when they allow a transaction to process that would have otherwise overdrawn an account. Customers can view an overdraft as a temporary loan from the bank, with the expectation of paying back the amount the bank covered plus an overdraft fee.
  • NSF fee: Banks commonly charge an NSF fee when an account lacks the funds required to cover a transaction and the bank doesn’t permit the transaction to process, resulting in a bounced check or denied electronic bill payment. A bank could impose an NSF fee when the account holder opts out of overdraft protection, surpasses the bank’s limit for overdraft protection or issues a payment that exceeds the amount of money in their account.

What Triggers an NSF Charge?

Several common causes of an NSF payment include unpredictable cash flow, inadequate fund management, delayed or missed payments and unexpected expenses.

Specific situations that may incur an NSF fee include:

  • A check that bounces: A bounced check means there wasn’t enough money in an account to cover the amount written. The business that accepted the check could issue a fee to the check writer in addition to a fee charged by the bank or credit union.
  • An electronic ACH payment that a bank doesn’t cover: When a bank processes an ACH payment and the account has insufficient funds, it will decline the transaction and may impose an NSF fee for the unsuccessful payment attempt.
  • A debit card purchase: A bank or credit union could issue an NSF fee if it rejects an attempted debit card transaction that exceeds the available funds in an account. NSF fees for debit card transactions are highly uncommon because most technologies can identify the funds a purchaser has available.

What Happens When an NSF Payment Is Issued?

When an NSF payment occurs, a number of negative consequences may follow. The financial institution of the person issuing the payment makes one of two choices.

Allowing the Payment

The bank may decide to let the ACH payment or check push through. This, however, would put the account holder into an overdrawn status. For some banks, this means they will charge a fee simply for overdrawing, but may continue to charge for each day or certain amount that they are over. It can end up burning quite a hole in the wallet.

Refusing the Payment

The bank may refuse to honor the payment. The bank will not allow the funds to be processed, and the account holder will likely be charged a fee just for issuing the payment without having funds available.

Potentially, the returned item could sink the depositor’s account into overdrawn status, also initiating an overdraft fee. Banks consider both the depositors and the account holders as being responsible for the NSF payment, and they have no problem making it a very expensive mistake.

 

How do You Protect Your Business From NSF Payments?

NSF payments can be very frustrating and costly to businesses that need to process the transactions. Some businesses decide not to accept ACH payments or checks at all as a last resort. However, this choice limits payment options for your customers.

For many businesses, accepting paper and eChecks is a wise decision. This practice gives customers the flexibility of selecting a payment option that works for them—and many people just want to simply have a payment come right out of their bank account.

But how can businesses handle NSF payments? It’s wise to have a plan set into place so that when NSF payments appear, it isn’t a complete disaster. NSF re-presentment is your best option, as it allows you to recover the funds for each unsuccessful ACH transaction.

 

What is NSF Re-Presentment?

When an NSF payment occurs, re-presentment will simply re-present the payment at a later date. This way, the payment has another chance to clear. CSG Forte’s NSF re-presentment option lets you select the date you wish to re-present the payment, enabling you to choose a time when you think there is a stronger likelihood that the funds are available.

You may know, for instance, when your customer gets their paycheck. Scheduling NSF re-presentment on or directly after this date increases your chances of accessing the funds and clearing the payment.

 

The Benefits of Using Recovery Solutions From CSG Forte

Our Recovery Solutions allow businesses to automate the process of recovering NSF payments. We will attempt to re-collect NSF payments up to two times on your behalf for ACH payments, saving you significant time and hassle. Benefits you’ll enjoy with this service include:

  • Improved payment recovery: Our smart re-presentment functionality allows companies to re-present payment when they will most likely receive a recovered payment.
  • Boosted revenue: Besides receiving the complete value of recovered payment, your business will receive part of the collected NSF fee and experience a revenue share.
  • Easy implementation: With a quick and simple implementation, you’ll be up and running in no time.
  • FCRA and Nacha compliance: Recover NSF payments with peace of mind. Our Recovery Solutions meet Fair Credit Reporting Act (FCRA) and Nacha regulations.
  • Reduce service disruptions: Improve the customer experience by reducing service disruptions due to incomplete payment.

How It Works

At CSG Forte, we make collecting NSF payments simple. When you’re hit with an NSF payment, our solutions will automatically attempt to recollect the ACH or eCheck payment up to two times.

Get in Touch With Us Today

Contact us today to learn how one large enterprise organization recovered $78M in principle through CSG Forte’s Recovery Solutions.