NSF Fees in Canada: How to Avoid Them 2025

Updated March 2025 · 9 min read

A non-sufficient funds (NSF) fee, also called a returned item fee or bounced payment fee, is one of the most punishing charges Canadian banks levy. Before 12 March 2026 they ran about $45 to $48 per incident at major banks. Federal regulations now cap the NSF fee on a personal deposit account at $10, and limit banks to one such fee per two business days. This guide explains what NSF fees are, what they cost, and how to avoid them entirely.

What Is an NSF Fee?

An NSF fee is charged when a payment is presented against your account but there are insufficient funds to cover it. The payment is returned (bounced), and you're charged a fee. Common situations that trigger NSF fees include:

• Pre-authorized debit payments (rent, subscriptions, insurance) on a low-balance day
• Cheques that bounce
• Bill payments that exceed your balance
• Post-dated cheques processed before your balance is replenished

The fee is charged by your bank for returning the item. The recipient may also charge their own returned payment fee, so a single bounced payment can result in two fees simultaneously.

NSF Fees at Major Canadian Banks (2025)

How NSF Fees Add Up

Two NSF fees per year equals $90 to $96 in charges. For Canadians living paycheque to paycheque, where a payment timing issue can trigger multiple NSF fees in a single pay period, the annual cost can easily reach $200 to $500. These fees disproportionately affect lower-income Canadians: a well-documented problem with the fee structure of Canadian banking.

10 Ways to Avoid NSF Fees

1. Align payment dates with your pay schedule: Call your billers (utilities, insurance, subscriptions) and request payment dates that fall after your payday, not before.
2. Maintain a balance buffer: Keep a permanent $100 to $300 floor in your account. Treat it as untouchable.
3. Set low-balance alerts: Configure your banking app to alert you when your balance drops below $100 or $200.
4. Use overdraft protection: A linked savings account transfer is the cheapest backstop, typically $5 to $10 per transfer versus $45+ for an NSF.
5. Switch to a prepaid account for variable spending: KOHO cannot go negative, making NSF fees impossible on that account.
6. Review all pre-authorized debits: Cancel subscriptions and services you no longer use. Unknown or forgotten charges are a common NSF trigger.
7. Use a credit card for recurring bills: Putting subscriptions on a credit card removes the direct account debit risk. Pay the credit card in full monthly.
8. Build a small emergency fund: Even $500 to $1,000 in a separate savings account (ideally EQ Bank at 3 to 4%) prevents most NSF situations.
9. Contact your bank after your first NSF: Many banks will waive the first NSF fee as a courtesy for long-standing customers. Ask, it works more often than people expect.
10. Switch to a bank that doesn't charge NSF fees: EQ Bank and KOHO don't charge NSF fees by design. Transactions decline rather than bounce.

EQ Bank and KOHO: No NSF Fees

Both EQ Bank and KOHO handle insufficient funds differently from traditional banks. Rather than processing a payment and charging a bounced-item fee, they simply decline the transaction. For debit and prepaid purchases, a declined card at the point of sale is less harmful than a $48 NSF fee.

The limitation is pre-authorized debits: if you set up a PAD (pre-authorized debit) from an EQ Bank account and the funds aren't there, EQ Bank will still decline the payment and may charge a returned PAD fee. Always ensure sufficient funds before PAD dates regardless of which bank you use.

What to Do If You've Been Charged NSF Fees

If you've been charged an NSF fee and it was a one-time issue (not a pattern), call your bank and ask for a fee reversal. Canadian banks will often waive one NSF fee per year as a goodwill gesture. Be polite, explain the circumstances, and ask directly. This works frequently and costs nothing to try.

Bottom Line

NSF fees are one of the most avoidable costs in Canadian banking. A small balance buffer, aligned payment dates, and a low-balance alert system eliminate the vast majority of NSF risks. For complete protection, KOHO's prepaid model makes NSF fees structurally impossible on everyday spending. At $45 to $48 per incident at major banks, avoiding even one NSF fee per year more than justifies these simple precautions.