Why Bank Overdraft Charges Can Hurt You

Why Bank Overdraft Charges Can Hurt You
Some of you may not know what a bank overdraft is. For those of you who don’t, it’s when you write a check and you don’t have enough money to cover it. If you write a check for say $75 and you don’t have the money to cover it, the bank will have to cover those expenses. When that happens you end up getting overdrawn and a fee is incurred because of it. When an overdraft happens that brings your account into the negative numbers. Most banks will usually charge a $35 or $45 fee for having to cover the expense.

This may not seem like a big deal to many of you, especially if it only happens once or twice. But if it happens more than once or twice, it can have a bad impact on your banking and your credit history. Every time that overdraft happens, it gets sent right to your credit history. That has a direct impact on your credit score.

In what ways will this have an impact on your credit score? For one, it will affect your bill paying. If you miss just one payment due to insufficient funds, this gets reported to the credit bureau. Your check will bounce and the company that you owe money too will not get their money. One missed payment may not have a huge affect on your score, but several missed payments will. The more you bounce your checks, the more your score and history gets impacted. That means lack of funding for loans and mortgages. You might also have a hard time getting a job, due to this delinquency.

What about the overdraft fees? If you have just one overdraft, than it might not be a big deal. But if you keep incurring draft after draft, that money adds up. The bank can charge hundreds of dollars for unpaid debts. That money needs to get replaced. The bank will charge you that $35, if not more, to cover that debt. But that money needs to get put back. You can’t keep leaving your account in the negative numbers. The linger your account stays in the negative, the more the bank has to cover what you owe. That money still needs to get put back. it could get to the point where the bank returns the checks, without paying them. When that happens they charge a bounce-check fee on top of the fees already incurred.

For your own sake, it’s better to not let it get this far. The deeper the hole, the longer it takes to climb out of it. If it gest to this point, your bank will place your account into collections. Which means that any fee that needs to get paid back, gets reported to them. This is also a major impact on your credit score. This impacts your score much harder than paying back a payday loan.

Another negative side effect of this issue is that the bank can place a freeze on your accounts. Any wages that you make will go directly to paying off your debts. That also means that your other bills will suffer too. Your bank can press charges against you. If you are convicted of the crime, you will have to pay restitution fees. Every fee that has every been charged to your account will need to be paid back.

This also spells disaster for your credit score and history. Whatever you do, don’t let it get this far. Keep track of your accounts. Just one bank overdraft can ruin your credit score and rating for life.

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