September 29, 2017

Bank Users: Check out How To Avoid Bank Penalties

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 , 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, 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.
Via The Punch
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