What Is An Overdraft Fee? What Is An Insufficient Funds Charge?
Overdraft fees and insufficient funds charged against a checking account are used by banks to encourage proper account management. Insufficient Funds Charges are bank fees assessed against a checking account when there are not enough available funds in the account to cover a check drawn on that account or when an electronic debit hits the account. The presented check or electronic debit is usually denied by the bank and returned as an "insufficient funds" item to the presenter. Overdraft Fees are identical to insufficient funds charges except that the presented check or electronic debit is paid by the bank for the customer up to a certain dollar limit using a courtesy overdraft payment service that often comes with the checking account. The overdraft fee is the service fee the bank charges for having paid the presented check or electronic item, thus saving the customer the embarrassment of the returned item and other possible fees from the party requesting payment.
Benefits and Dangers of Courtesy Overdraft Payment Services
Courtesy overdraft payment services have the following benefits.
- Your item is still paid even though you did not have the funds to pay for the item.
- You avoid the embarrassment and potential fees from the party requesting payment from your account.
- The service comes with many checking accounts and you do not need to take further steps to set it up.
Courtesy overdraft payment services have the following danger points, as well.
- Overdraft fees are expensive. An occasional overdraft for $35.00 is one thing, but numerous overdraft fees build up quickly since one overdraft fee is usually charged per item covered up to a certain dollar limit.
- Courtesy overdraft payment service is not a loan. The overdraft payment service is not intended to serve as an income supplement. Abusing this service often leads to people spending beyond their ability to repay the balance owed to the bank for covered items.
- Overdraft payment services can lead to high negative balances which can lead to other fees such as daily overdraft fees. Eventually, the negative balances may be charged off by the bank if the negative balance is not repaid. The account owner may also be reported to Chexsystems or Telecheck.
Understanding Available Balance vs. Current Balance / Present Balance of Your Account
Some banks will state your available account balance as your total deposits not on hold plus your overdraft payment service available to you. Univest always quotes the available balance to you as the total dollars credited to your account, excluding holds. Univest will not report your available balance with any overdraft payment service amount included. Univest believes that it is crucial that you properly understand the amount of your funds available to you in your account. Univest does not set the stage for you to overdraft your account. In the event, that you need the courtesy overdraft payment service, it is there. Your current balance (sometimes called present balance) includes all funds credited to your account at that time, including funds on hold.
How Can I Avoid Overdraft Fees and Insufficient Funds Charges?
- Be a responsible bank account holder. Keep track of all checks, electronic debits, ATM withdrawals, and debit card purchases.
- Use your online banking service to check your account balance often.
- Utilize the e-mail alerts feature in your online banking service to notify you when your account drops below a certain balance. If your bank does not offer this service, consider switching your accounts to Univest.
- Enroll in a true overdraft protection plan such as Univest's Money Manager tool. This allows you to use your Univest online savings account balance as coverage for your online checking account in the event of an overdrawn account situation.
When Will Univest Consider Reversing An Overdraft Fee or Insufficient Funds Charge?
Univest will always reverse an overdraft fee or an insufficient funds charge that is clearly a bank error. Univest also believes that a good customer relationship is the lifeblood of its business. If you made a reasonable effort to resolve a negative account balance, if you have a track record of sound account management, or if you have been a victim of fraud, Univest is always here to listen and work with you to help you meet your financial goals. However, consistently poor account management or patterns of overdraft abuse will usually prevent Univest from reversing any overdraft fees or insufficient funds charges on an account.
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