What Is a Returned Payment Fee?
Let me explain what a returned payment fee really is. It's a one-time penalty that your bank charges you when you bounce a check. You'll get a notice from the bank saying the check was returned unpaid because there weren't enough funds in your account. Depending on your bank, this fee can run you between $25 and $40 for each bad check.
If you're paying with a check or an online transfer to your credit card issuer and it gets declined by your bank, they'll tack on their own penalty fee.
To fix this, you need to deposit enough money to cover the original check plus all the fees, then tell the recipient to resubmit it for payment. If you handle it quickly, your credit rating won't take a hit.
Key Takeaways
Here's what you need to know in brief. A returned payment fee hits when you bounce a payment. This can happen because of insufficient funds, a closed account, or a frozen one. Banks and financial institutions charge these to their customers. Service providers like cable companies, cell phone services, wireless providers, and gyms also impose them. Credit card companies usually have the highest returned payment fees among creditors.
Understanding Returned Payment Fees
Creditors hit you with various fees—some for services, others as punishments. Service fees include things like account maintenance, minimum balance requirements, and transfer charges. Punitive ones cover non-sufficient funds (NSF) charges, late fees, and returned payment fees. They have to list all these, including returned payment amounts, in your agreement.
Returned payment fees, sometimes called dishonored payment fees, apply when you try to pay with insufficient funds. They typically range from $25 to $40 per incident, depending on the creditor.
Payments get returned for reasons like not enough money in your account or because the account is closed. Banks might freeze accounts due to suspicious activity or government garnishments, leading to returned payments too.
These fees aren't just for checks; they can happen with online or automatic payments. Be careful when using checks or setting up autos. If you know you won't have the funds by the due date, don't send the check. Late fees and interest might apply instead, but you'll avoid the returned payment and NSF fees. You can cancel recurring payments or switch to a funded account to dodge this.
Important Note
When your creditor charges a returned payment fee, you're likely to get an NSF fee from your bank on top of it.
Special Considerations
Some institutions will waive returned payment fees under certain conditions. For instance, they might let it slide for a first-time issue or if your account is in good standing. Others could waive it if you have a valid reason for the rejection that wasn't your fault. Always contact your financial institution if there was an error beyond your control.
Returned payment fees often come with late fees and interest. If you pay your credit card at the last minute and it doesn't clear, your minimum payment is late, and you'll owe a late fee. Some cards skip late fees altogether or waive the first one. Even without a late fee, interest usually applies. You might see your interest rate go up if the returned payment causes you to miss the deadline. Your bank could also charge an NSF fee for the bad check.
Types of Returned Payment Fees
Credit card companies tend to have the highest returned payment fees, sometimes up to $40. Check your card's terms and conditions to see if it applies and how much.
Other creditors charge them too, including cable services, cell phone companies, wireless providers, and gyms. Many contracts, like car leases and financing agreements, spell out returned payment charges as well.
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