Anytime you have a checking or savings account with a bank, you are given certain specific terms and conditions that must be accepted by both you and the bank. Generally, these include a stipulation that if you overdraw your account, which basically means you spend more money than what is currently available in your account, then the bank can charge you an overdraft fee. An overdraft fee is basically a penalty set forth by the bank for you to pay in order to cover the associated costs of the overdraw. The exact amount of money that you are asked to pay for an overdraft fee will vary depending on the specific bank that you are using and how much money is being overdrawn as well.
Unfortunately, many people find themselves in a situation where they have overdrawn their accounts or have fees associated with their overdrafts and are unable to pay them back immediately. This can lead to an increase in fees and can even land the customer in debt if not managed properly. That’s why it’s important to make sure you understand the consequences that come along with not paying your overdraft fees. In this article, we will go over some of the main things that happen if you never pay back your overdraft fees.
What Happens if You Don’t Pay Your Overdraft Fees?
When you don’t pay back your overdraft fees, there are a few things that can happen:
- Your bank can charge you additional fees and charges.
Since overdrafts occur when you spend more money than is available in your checking or savings account, banks need to recoup their losses and will do this by charging you additional fees. These can include but are not limited to: non-payment fees, late payment fees, overdraft protection charges, bounced check charges, and more.
- Your bank may close your account.
If your overdraft fees remain unpaid, your bank may opt to close your account in order to protect themselves from additional losses. This can be a major issue if the account is the main form of payment that you use, such as having your paycheck deposited into the account or using it to pay bills.
- You can have a negative credit report.
The bank may report any unpaid overdraft fees to the credit bureaus, which can result in negative items being added to your credit report. This can do a lot of damage to your credit score, making it harder to obtain loans or get credit in the future.
- You could be sent to collections.
If you don’t pay your overdraft fees, your bank may turn your debt over to a collection agency. This could mean that a collector will contact you and demand payment, and if you don’t comply, then legal action may be taken against you.
How to Avoid Overdraft Fees
Now that you know some of the more serious consequences of not paying your overdraft fees, you’re likely wondering how you can avoid them in the future. Luckily, there are a few things that you can do to protect yourself from overdraft fees and make sure you are always in the know.
- Keep an Eye On Your Accounts
One of the best ways to make sure you aren’t hit with overdraft fees is to keep an eye on your accounts and make sure the money you spend each month is what’s actually available in your accounts. You can do this by utilizing online banking, which will allow you to easily monitor your accounts from anywhere.
- Set Up Account Alerts
You can also set up account alerts with your bank so that you receive a notification when a certain threshold has been reached. This can be a great preventative measure and can help you manage your finances better so that you don’t end up in an overdraft situation.
- Utilize an Overdraft Protection
Your bank may also offer you the option to set up overdraft protection, which will help protect you from fees associated with overdrafts. This usually entails linking your checking or savings account to your credit card so that if your checking or savings account can’t cover the transaction, then your credit card can help pick up the slack.
- Consider a Line Of Credit
Another option to consider is a line of credit, which is basically a supplement line of funds you can use when you need to cover a large purchase. This can be especially helpful if you find yourself in a situation where you don’t have enough money saved up to cover the billing cycle, but you know you can cover it in the near future.
Overdraft fees can add up very quickly if not paid back immediately and can create a lot of problems for those who are unable to pay them back. By understanding the consequences of not paying your overdraft fees and taking steps to protect yourself from them, you can ensure that you stay on track with finances and avoid any of the adverse effects that can come from not paying your overdraft fees back.
