Debt problems are many and unfortunately their very nature means that they are self perpetuating. The more dire your financial situation becomes, the more it will tend to spiral out of control and the more problems can stack out. One such problem is bouncing checks and direct debits/standing orders. Once these are put in motion you have essentially entered into an agreement and if you then don’t have the sufficient funds for the transfer you will often find that you are penalized with bank fees (‘admin fees’) and often by the company on the receiving end of the transaction too.
These can then mount up, and you can end up paying hundreds in bank fees at a time when you really can’t afford the extra charge. So what can you do?
One thing is to make sure that you are always familiar with how much money is in your account. Keep a cash book and write all your income and outgoings in there so you can monitor your situation (and give checks and payments a few days to clear). Meanwhile check online and at ATMs regularly to avoid bouncing checks and direct debits. If you don’t have enough then you should try to get money from else where to avoid bouncing checks and debits. To do this try transferring money from your other accounts, and getting money from other sources where you can then pay this in quickly.
Now only make the payment if you have the money in your account to pay it. If you don’t have the money then visit your bank and ask them to cancel the direct debit, check or standing order. By doing this you will save yourself from bouncing checks and associated fees and by the time the person you owe money to gets in touch you can hopefully make the payment.
That said, informing the relevant parties of a check that is about to bounce or that has been canceled is crucial. You might just close your eyes and hope for the best rather than inform the person you are meant to be paying that you don’t have the money, but this is not the sensible option – either way they aren’t going to be paid so it’s much better coming from you early on. Inform them early enough and you may even be able to rearrange the payment or roll it over until next month. You should also speak with your bank and inform them that you have a check or debit that is about to bounce. By informing them ahead of time you can speak about your options – such as applying for an overdraft. You may even be able to get a small free overdraft, or at least one with low interest. If nothing else, by informing the bank ahead of time you can often get out of bank ‘admin fees’.
If you are late informing your bank of bouncing checks then you may still be able to ask them to lift their admin fees. In actual fact, most admin fees are considered unfair and extortionate and there have been talks of limiting the amount a bank can charge – essentially you are currently being asked to pay for the privilege of being fined. If this is the first or second time you’ve had a bouncing check, or if you can prove that it wasn’t your fault, then often your bank will be understanding and will agree to pay back the money. Furthermore, if you have been subject to a lot of bank fees over time then you may even be able to get some of the money back if you write a letter – and there is advice at hand if you need it.