Insufficient Funds Definition

When an account cannot provide adequate funds to satisfy a payment the situation is one of insufficient funds. The most common example of this is when someone tries to buy something using a check or a debit card, and the purchase price exceeds their available account balance. In this case, a debit card transaction would be refused whereas a check would bounce. Most financial institutions charge hefty fees for insufficient funds transaction attempt, and most merchants charge their own fees. Most insufficient funds checks are reported on the check writer’s credit history. Deliberately or knowingly writing an insufficient funds check is a crime and is defined as fraud in many jurisdictions.