Even though banks impose penalties if a customer commits any
banking infractions, you can avoid penalties if you abide by the rules
stipulated by your bank.
Commercial banks impose various charges on customers for services
rendered. However, they also impose penalties if a customer commits any
banking infractions. While bank fees and charges may be unavoidable, you
can avoid penalties if you abide by the rules stipulated by your bank.
According to www.choice.com.au, you do not need to get stung by unfair fees for late payments, overdrawn accounts and bounced cheques.
Some experts believe banks shouldn’t be allowed to charge customers
more than it costs to fix a routine banking mishap such as a
temporarily overdrawn account. The argument from consumer rights
advocates as well as legal professionals is that banks shouldn’t be
allowed to impose fines on customers.
Bank penalty fees have come down considerably in recent years, but
there are still high ones out there, and they are as unfair as ever.
Activists are cautiously optimistic that the era of high penalty
fees is coming to an end, but in the meantime you can take a few basic
steps to make sure you don’t get stung.
What kinds of penalty fees should you watch out for?
Periodic payment dishonour: You ask your bank to
make regular payments to another account (for example to pay your rent
or a bill) but when the payment is processed, your account has
insufficient funds and the transaction is declined (similar to direct
debit dishonours).
Overdrawn account: You write a cheque or authorise a payment from your account but the transaction causes your account to be overdrawn.
Cheque dishonour (outward): You write a cheque and
when it is presented for payment, your account doesn’t have enough
funds for the cheque to clear, so the cheque is dishonoured and you are
penalised.
Cheque dishonour (inward): You present a cheque to your bank and it’s dishonoured by the bank of the person who wrote the cheque.
Stop cheque: You write a cheque but then ask your
bank to cancel it and stop payment. You may be charged another fee if
the cheque is subsequently presented for payment by a third party.
Late payment fee: You don’t pay the minimum amount by the due date. These penalties are sometimes applied more than once in a statement period.
Over-limit fee: You exceed your credit limit, even
by a small amount. With some credit cards, the same penalty can apply
whether you are N10,000 over your limit, but some will charge
incrementally (imagine a speeding fine that increases according to how
far over the speed limit you were travelling!)
How can I avoid penalty fees?
- Choose an account that doesn’t charge penalty fees, or an account that charges lower penalties. It is a no-brainer, but it is the best approach. Simply check the bank’s fee schedule on its website (or check the product disclosure statement).If it’s too late for that, contact your bank and ask for penalties to be reversed. Many consumers have been successful at getting their penalty fees reversed or waived.Know your account or card. Be familiar with how penalty fees are applied so you have better odds of avoiding them.
- Know your incomings and outgoings. Check that expected payments have been made into your account, and be aware of the timing of direct debits, so that you have enough in your account to cover them.
- Arrange for automatic payments to your credit card. They can be handy to ensure you at least pay your minimum monthly amount due each month, to avoid late payment fees.
- Open a basic account. If you’re eligible for a concession account, you can lower your general transaction fees, and some banks reduce your penalties too. Check what your financial institution offers. A number of banks have lower penalties for concession accounts.
Six reasons why your cheque can bounce
If you think this can be a very simple thing as to why your cheque may bounce… it is not.
According to www.stepupmoney.com, here are six main reasons why your cheque bounced.
While not all people having a bank account use cheques, most do so
and we think we know all about writing cheques while infact a lot of us
don’t. Even if we do know about writing cheques, are we fully aware of
reasons why a cheque bounces? Or what is a bounced cheque?
Well, a bounced cheque simply means a cheque that the bank refuses
to pass or honour and is intimated to the issuer and the receiver and a
nominal penalty is charged.
A bounced cheque also invites legal action if the receiver wishes
so and there are cases where in a cheque dishonour of significant
amounts has invited criminal charges. Hence, it becomes vital for one to
know the typical reasons why a cheque can bounce.
Reasons for cheque to bounce
1. Insufficient funds
Lack of funds in the account from which the cheque is issued is
among the main and most common reasons for the cheque to bounce. If you
have issued or have received a cheque linked to an account that has less
amount of money than the once written on the cheque, then the bank will
not find the enough money to complete the transaction and hence, will
stop the payment and dishonour the cheque.
It will also levy a nominal penalty on both parties – the issuer
and the depositor – for this. After this, the issuer can either issue a
new cheque or settle the matter with the receiver/depositor of the
cheque; or the receiver of the cheque has an option to initiate legal
action against the issuer for non-payment and dishonour of the cheque.
Hence, it is advised to always be careful while issuing the cheques and
make sure you have sufficient balance in the account.
2. Problems with date of the cheques
Yes, date can lead to a bounced cheque. The typical problem with
the date can be that the date is disfigured or has some mistake, or is
not readable or scribbled, will lead to your cheque bouncing.
The other reason is that the date has expired or in other words,
the date on the cheque is more than three months old, from the current
date. A cheque is only valid for three months from the date that is
mentioned in its date column.
The other issue is post-dated cheques being deposited earlier than
they are due. Post-dated cheques or PDC are cheques issued for a future
date.
3. Signature mismatch
If the signature is mismatched, or does not match the banks
records, then your cheque will bounce. If the signature is not as per
the bank records then they will dishonour your cheque. Also if you
happen to sign on the MICR Band on the cheque, then the cheque will
bounce. So be careful with the signatures.
4. Difference in amount in words and numbers
If the cheque happens to have any difference in the amount payable
mentioned in words and in numbers, then banks will bounce you cheque.
This is also true if the amount mentioned in the words section, has
numbers in it in any form and also if the amount in figures/numbers
column has any words written in that.
Same would happen if the amount in words is mentioned as ‘50
thousand’ only and in figure’s column it is 50,000/- even though the
amounts are same, the use of numbers in the words section is not
allowed. Or even if you have a cheque like this, wherein amount in
figures is written as 50 thousand, of course that cheque will also
bounce.
5. Disfigured or damaged cheque
If the cheque is damaged, torn, disfigured meaning it is not in a
good condition or has some details not clearly visible; has too many
stains for whatever reason etc., these types of cheques will bounce. So
preserve the cheques properly.
6. Scribbling, overwriting on cheque:
Any kind of scribbling, overwriting, or correction on a cheque is
not allowed and if a cheque is found that way, it will be dishonoured.
It is always good to issue a fresh cheque if you make a mistake while
writing it. Also, if you receive a cheque that has such thing, ask for a
new one.
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Via The Punch
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