Question

Luke received a notice from his bank stating the he wrote a check for $150.00 when he only had $100.00 in his account. What fee will be charged to the account?

Answer 1

The fee that will be charged to Luke's account is the non-sufficient funds fee.

Step-by-step explanation:

When an account holder decides to meet a certain financial demand, but the demand exceeds his/her account balance, then the bank will charge a non-sufficient funds fee on that transaction. This in most cases is due to the fact that the funds in that account might be not fully settled, thus the demand exceeds the expected available account balance.

Since the process of clearing a check or even making a purchase using the account is a service, the bank automatically charges for that service regardless of it being successful or not since the payment processing networks have to process the payments to determine the account holders information. This is a service that has to be paid for.

The account holder can however change the settings to his/her bank's overdraft policies. An overdraft policy can allow the customer to give the bank authority to cover the purchase but it always comes with hefty insufficient funds per transaction. The non-sufficient fee is typically about $35 per transaction. This means that the more one makes an overdraft authorization, the more the insufficient funds fee he/she accrues.

In our case, Luke decided to clear a check for $150 when his account balance was only $100. This means that he was $50 short. An insufficient funds fee will therefor be charged to his account.