This guide explains what happens when a payment bounces, what the new rules allow your bank to charge, and what to do in the first few days.

The short answer

When a cheque or pre-authorized debit bounces at a federally regulated bank, the bank returns the payment unpaid and can charge you an NSF fee of no more than $10. It cannot charge that fee more than once in two business days on the same account, and it cannot charge one at all if the shortfall is less than $10. The company you were paying is not bound by the cap and may add its own returned-payment fee.

The cap is in section 10.1 of the federal Financial Consumer Protection Framework Regulations. The Financial Consumer Agency of Canada (FCAC) announced that the change came into force on March 12, 2026. Before that, the FCAC says NSF fees typically ran about $45 to $48, often regardless of how small the shortfall was.

What actually happens when a payment bounces

NSF stands for non-sufficient funds. When a cheque you wrote or an automatic withdrawal is presented and your balance is too low, your bank has two choices. It can pay the item and put your account into overdraft, or it can return it unpaid to the company that tried to collect. When it returns the item, it can charge you an NSF fee.

Three things then happen, roughly in this order:

• Your bank charges the NSF fee, now capped at $10, which lowers your balance further.
• The payee finds out the payment failed. A gym, phone company, insurer or landlord may then charge its own fee and ask you to pay again, sometimes by a set date.
• The bill itself is now unpaid. If it was a loan or credit card payment, RBC notes that a bounced payment can lead to a missed payment that may hurt your credit score.

Federal analysis published with the rules says banks charge NSF fees on cheques and pre-authorized debits. It notes that NSF fees are not charged on instant transactions such as Interac e-Transfers. Those are simply declined when the money is not there.

The three limits in the new rule

1. A $10 maximum

Section 10.1(1) lets a bank charge a person “not more than $10” when their personal deposit account does not have enough money to cover a payment. RBC and TD have already updated their pricing. RBC’s fee notice lists the NSF fee at $10 per returned item from March 6, 2026, down from $45. TD’s account disclosure, effective March 5, 2026, lists $10 for Canadian-dollar accounts.

2. One fee per two business days

If several payments bounce close together, you cannot be charged for each one. The bank “must not impose a charge for non-sufficient funds more than once within a period of two business days in respect of the same personal deposit account.” Before the change, the FCAC says, NSF fees were sometimes charged repeatedly.

3. No fee on small shortfalls

The bank also cannot charge an NSF fee on an account that is in unauthorized overdraft by less than $10. If you are $6 short on a $50 payment, there should be no NSF fee, although the payment may still be returned or you may owe overdraft interest if the bank pays it.

A worked example: four payments in one bad week

Say you have $40 in your chequing account on Monday, November 2, 2026, and four payments come due that week. None of them can be covered and you have no overdraft protection. Here is what the bank can charge under the new rules, compared with a flat $45 per item, which was RBC’s fee before the change.

Hypothetical example. Shortfalls are measured against the $40 opening balance. The $10 fee after the gym payment lowers the balance to $30, which does not change any outcome. The rent cheque falls four business days after Monday, so a new fee can apply.

The bank side drops from $180 to $20, a saving of $160, or about 89%. The catch is the other column you do not see. Each of those four companies can charge its own returned-payment fee. The federal impact analysis says merchant fees are typically $20 to $40. At that range, four payees could add $80 to $160, which is now likely to be the bigger part of the bill. Your total for the week would be $100 to $180 under the new rules, compared with $260 to $340 before.

What the cap does not cover

• Fees charged by the company you were paying. The federal analysis says the rules “do not apply to other fees (such as dishonoured payment fees) charged by merchants, lenders or other fund recipients.” Provincial rules may limit some of them. In Ontario, for example, Community Legal Education Ontario says the most a landlord can charge is $20 for each bounced cheque, or whatever amount their bank charged them.
• Business accounts. The measures apply to the personal deposit accounts of individuals, including joint accounts, and not to corporations or business accounts.
• Payments over your overdraft limit. Overdraft protection prevents NSF fees only up to your approved limit. Go past it and the $10 fee can still apply.
• Overdraft charges. The NSF cap does not limit overdraft protection fees or overdraft interest. TD, for example, lists overdraft protection at up to $5 a month on a monthly plan or $5 per use, plus interest at 21% a year on the overdrawn amount.
• Provincially regulated institutions. The FCAC says the rules apply to federally regulated banks. If you bank with a provincial credit union or caisse, check its own fee schedule.

Your bank should warn you first

Section 627.13 of the Bank Act requires a bank to send you an electronic alert without delay when your personal deposit account balance falls below an amount you choose, or $100 if you do not choose one. The alert must say what you can do to avoid charges and by when. You can opt out in writing, and you will not get alerts if the bank does not have your contact details. If you never see these alerts, check your settings in the banking app. Keeping some cash in chequing rather than all of it in savings also helps. Our chequing vs savings guide covers how to split it.

What to do after a payment bounces

1. Check which payment failed and the fee charged. Look at your transactions. The NSF fee should be $10 or less at a federally regulated bank, and only once in two business days.
2. Ask for a refund if the fee breaks the rules. If you were charged twice in two business days, or charged when you were less than $10 short, contact your bank and point to section 10.1.
3. Contact the payee the same day. Ask how to pay again, by what date, and whether they will waive their returned-payment fee for a first time.
4. Pay credit and loan bills first. A missed loan or card payment can affect your credit. Our guide to credit card minimum payments explains what happens when a payment is late.
5. Fix the cause. Move pre-authorized debit dates to just after payday, set a low-balance alert above $100 if your bills are large, or consider overdraft protection if you can clear it quickly.
6. Escalate if the bank will not correct it. Use the bank’s complaints process first, then its external complaints body, and you can report a possible breach to the FCAC.

Frequently asked questions

• Sources, checked October 20, 2026: Financial Consumer Protection Framework Regulations (SOR/2021-181), current to 2026-09-30, section 10.1; Canada Gazette Part II, SOR/2025-96 and Regulatory Impact Analysis Statement (registered March 12, 2025); FCAC: New NSF fee regulations bring down cost of banking for Canadians (March 12, 2026); Bank Act, section 627.13, current to 2026-09-21; RBC Royal Bank NSF fee notice (effective March 6, 2026); TD: About Our Accounts and Related Services (effective March 5, 2026); CLEO: What your landlord can charge you (modified January 14, 2025).
• Method: The weekly example applies the three limits in section 10.1 by script, then re-checks the totals by hand (two $10 fees against four $45 fees). Overdraft interest is simple daily interest, $300 x 21% x 14 / 365, and was cross-checked with daily compounding ($2.43). Merchant fees use the $20 to $40 range from the federal impact analysis. Dates were checked against the 2026 calendar.

Important: This guide is general information, not legal or financial advice. Fees and account terms change, so check your own bank’s current fee schedule. Rules for provincially regulated credit unions and caisses may differ. Gizly is not paid by any bank mentioned here. See our affiliate disclosure.