What You Need to Know about Bounced Cheques & NSF Payments
Sure almost everyone has had a cheque bounce once in their life and you might think that it is not that big of a deal. Did you know that this can lead to larger financial problems and possibly criminal charges? If you are accused of deliberately defrauding someone by writing a bad cheque you could face criminal charges. As well if you have written a bad cheque in the past your bank or financial institution may put holds on the cheques you are trying to deposit. This can significantly impacted your day to day banking & possibly make you late on paying your bills or worse paying your mortgage payments.
Overdraft Protection & the Cost of Convenience
Overdraft protection gets offered by banks and financial institutions all the time as a way to cover yourself in the case that you may not have enough in your bank account to cover payments or cheques. Many people don’t take a look at the cost associated with caring this type of protection. Fees associated with this convenience can be as high as many payday loan companies. This is a cost that most banks will not disclose to their customers up front.
Common Reasons Cheques Bounce & NSF Payments
- Two people using the same bank account and not communicating each transaction to one another
- Not maintaining a balanced cheque book can cause NSF Payments & Cheques to Bounce
- Missed entries in the cheque book so that it appears you have more money available than you actually do
- Writing a cheque before money to cover the cheque is processed through your bank account
- Fraudulent Activity with your chequing account
Long-term effects of poor cheque writing and bookkeeping
Bounced cheques typically do not appear on your credit bureau but the affects of writing bad cheques over time do tend to trickle down and affect your credit. The penalties for writing bad cheques in most cases end up affecting people’s cash flow. With cash flow affected coupled with holds on cheques being deposited into bank accounts that have shown fraud, the repercussions are usually late payment or worse missed mortgage payments. Once your credit score gets affected due to these delinquencies in can significantly hinder your ability to refinance mortgage due to bad credit. This can lead you into a higher rate home equity mortgage product. Higher rate mortgage financing can significantly reduce your cash flow.
What Can You Do To Help Avoid Credit Issues
Now that you have a little more insight into the benefits of writing good cheques you can appreciate why it is important to keep your financial affairs in order to avoid bad credit financing.
Here are some steps to help you protect yourself:
- Keep a careful record of your cheque book debits
- Have one person write all the cheques and balance the cheque book
- Use automatic withdrawals linked to credit cards (make sure you pay off your credit card every month)
- Obtain a line of credit to help you in times of financial restraint. It is easier to ask for credit when you do not require it rather than waiting until you are in a position of need.