What happens if my card payment is returned?
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Sometimes, it’s difficult to stay on top of your financial situation. Have you ever made a credit card payment that has not gone through and wondered how that might impact you?
Returned payment fee
Banks have their own policies about how to deal with the situation when the credit card payment you send them does not clear your financial institution. Typically, they will charge you a fee for a returned payment. The card issuer may also make more than one attempt at collecting the money from your financial institution. In case the payment goes through at some point, the issuer may still collect the returned payment fee.
The amount of the returned payment fee varies, and would be lower if you had no other recent returned payment offense on your record. For instance, your issuer could charge a $27 returned payment fee if you haven’t been liable for a returned payment offense in the last six billing periods. If you have been guilty of the same offense recently, the fee could be a higher $37. In any event, the fee will not be higher than your minimum payment due.
Card issuers could also charge you a late fee if your card payment is returned, depending on the terms of your agreement with them.
Bank charge for non-sufficient funds
Not only will your card issuer charge you if your card payment is returned, but your financial institution will also typically penalize you with a “non-sufficient funds” fee that’s about $34.
According to the Consumer Financial Protection Bureau (which is waging a war against banks’ “junk fees”) one positive development is that a number of large financial institutions have decided to do away with non-sufficient fund fees on their checking accounts. This will result in annual consumer savings of about $1 billion, the consumer protection agency says in a blog post.
The CFPB notes, “Consumers receive no service at all in exchange for this fee. Indeed, NSF fees intensify financial distress for consumers, who often are already at their financial edge and who will often also be hit by the fee merchants charge when a consumer’s payment bounces. NSF fees average $34 each, even as any marginal cost to the institution to return a payment is likely exceedingly low. The Bureau is closely scrutinizing whether and when charging these fees may be unlawful.”
A positive development is that a number of large banks have decided to do away with non-sufficient funds fees on checking accounts in recent months. The CFPB reports that these include:
- Bank of America
- Capital One
- JP Morgan Chase
- US Bank
- Wells Fargo
Your payment history is a big part of your credit score (accounting for 35 percent of the score), and making payments on time helps build up your score. If your card payment does not go through and you are past the payment due date, it will be seen as a late payment, or even a missed payment. That would tend to bring down your score. A missed payment could stay on your credit report for up to seven years.
The good news is that typically your payment would have to be more than 30 days past the due date for the card issuer to report this lapse to the credit reporting agencies. In case you have an otherwise good record with your account, you should talk to your issuer’s customer representative and ask for grace for this one-time lapse.
The bottom line
If your credit card payment does not go through, your card issuer will typically charge you a returned payment fee. It could even add on a late payment fee, depending on the terms of your card agreement. Not only that, but your bank may also assess you for a “non-sufficient funds” fee.
A late or missed payment could eventually show up on your credit report and bring down your credit score. It could even stick to your credit report for up to seven years.
The best way to guard against a returned payment is to keep track of the funds in your account and budget your spending.