New federal rules limiting non-sufficient funds charges have come into effect across Canada, reducing the amount banks can charge customers when they do not have enough money in their accounts.

The government has introduced a cap of 10 dollars on NSF fees for personal deposit accounts. The rules came into force on Thursday and are designed to reduce high banking charges faced by many Canadians.

Previously, some banks charged up to 50 dollars for insufficient funds fees.

Under the new regulations, banks are also prohibited from charging more than one NSF fee within a two business day period for the same account.

Financial institutions are also banned from applying the charge if the account shortfall is less than 10 dollars.

ACORN Canada welcomed the decision and said it would help many households struggling with everyday expenses.

“These changes will directly benefit millions of Canadians — especially renters, single parents, gig workers, and people living paycheque to paycheque — by preventing fees from spiralling into deeper financial hardship,” the organisation said in a statement.

The federal government estimates the new cap will save Canadians more than 600 million dollars each year.