Debit cards come in handy when making quick translations like online purchases, ATM withdrawals, and in-person purchases. For a debit card to work, you need to have money in your checking account; else, you’ll receive the ” insufficient funds” prompt when you try using it to make a transaction. However, sometimes you may have funds in your account and still get the ” insufficient funds” prompt. Why is that?
You may get the “insufficient funds” notification even when you have money in your checking account because the check deposited in your account is yet to settle. When it does, you’ll be able to make transactions.
You don’t expect transactions to go through when your checking account is empty, right? But what if you have enough money in your account yet get the ” insufficient funds” alert when you try using your card? Does it mean your account is empty? Or is your card faulty? Read on to unravel this mystery.
How to Withdraw Money From an ATM With Insufficient Funds?
Why Does My Debit Card Say Insufficient Funds When I Have Money?
When you initiate a payment from your checking account, you should have that money available already. Whether you write a check, use your debit card or initiate an e-transfer, if you don’t have money in your account, your bank can stop the transaction because of insufficient funds.
But, what if you have enough money in your bank account and your bank still declines the transaction due to insufficient funds? Why do such happen? Before we delve into that, let’s first understand what insufficient fund is.
What Are Insufficient Funds?
The term insufficient funds or non-sufficient funds refers to the status of a checking account that doesn’t have adequate money to cover all transactions. Insufficient fund also describes the fee charged when a check is presented but cannot be covered by the balance in the account. You may see a “non-sufficient funds” or “insufficient funds” notice on a bank statement or at an ATM terminal (or on a receipt) when trying to withdraw more funds than what you have in your account.
Colloquially, insufficient funds checks are referred to as “bounced” or “bad” checks. If a bank gets a check written on an account with insufficient funds, the bank can reject payment and charge the account holder an NSF fee. Also, the merchant may charge a penalty or fee for the bounced check.
Insufficient Fund Example:
A classic example where you may encounter the phrase “insufficient” is when you are using your checking account to pay for a purchase or service.
Let’s say you have $1000 in your checking account. Imagine that you visit a mall and make a purchase by writing a check for $1,500.
When the merchant tries to cash your check, your financial institution will refuse to honor it as you don’t have sufficient money in your account to cover the amount needed by check.
In this case, the seller will receive insufficient funds notice signaling that the check could not be cashed (when this happens, we usually say “the check has bounced”).
On your end, you will also receive a notice from your bank indicating that your check could not be honored, and you will get an insufficient funds charge or penalty.
How to Avoid Non-sufficient Fund Fees?
To avoid getting charged, you can talk to your bank to see what options you may have to stop a transaction from failing because of insufficient funds.
Some of the common options are:
- Obtaining an overdraft protection
- Linking a savings account to the account
- Linking a credit card to the account
- Setting up an alert where you are notified that your balance has gotten to a particular level.
Why Do You Get Notice of Insufficient Funds Even When You Have Money?
There are some instances when you are pretty sure that you have enough funds in your account, but you receive a notice for not having sufficient funds.
What is the reason for that?
This is likely to occur when you have deposited a check or credited your account, but the cash transaction is yet to settle. For instance, imagine you have $300 in your checking account and deposit a check for $300. You assume that you have $600 (and so you can make a purchase of $500)
But, if your check takes around two business days to settle, then although your account is showing $600, you only have your original balance as “available” funds, and the rest is pending clearance by the bank.
Will a Check Go Through With Insufficient Funds?
Technically, a check will not go through when you don’t have adequate funds in your account to cover the check.
But, if your checking account is connected to a saving account, line of credit, or has overdraft protection, then your check will go through even when your account is in the negative.
After the check goes through, your account balance will be negative, and you will owe your bank the amount it advanced to cover your check.
Why Is My Debit Card Declined When I Have Money?
Uncollected Funds Vs. Insufficient Funds
By now, you should understand what insufficient funds are. But do you know the difference between uncollected funds and insufficient funds?
When you are dealing with insufficient funds, it means you are trying to initiate a debit transaction, purchase, or transfer for more than you have in your checking account.
But uncollected funds, on the other hand, refer to when you have deposited a check in your account, and the funds are yet to be cleared (or available) to you for spending.
When you deposit a check, it may take around three to five business days for the check to clear. Even though your credit is pending, you will receive uncollected funds notice if you try to spend the money that hasn’t cleared.
