What is a dishonoured payment fee?
A dishonoured payment fee is when a payment that you made for your credit card is not completed successfully. This usually happens if you don’t have enough money in the bank account you used to try to make the payment. It can also occur if you mistakenly used a closed bank account or got your credit card information wrong when trying to make the payment.
A dishonoured payment can also occur when you’ve signed up for automatic payments with your credit card company. When used correctly, automatic/recurring payments are a great idea because it ensures you never forget to pay off your monthly credit card bill. However, if you happen to have made more withdrawals on your bank account than you usually do and forget to make sure you have topped up the funds in your account in time for your credit card automatic payment, you could be hit with a dishonoured payment fee.
Credit card companies charge dishonoured payment fees because they want to ensure that people don’t make it a habit to forget to pay off their card in a timely manner.
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Get A QuoteHow much is a dishonoured payment fee?
The cost of a dishonoured payment fee varies depending on the credit card provider or financial institution. Typically, the fee ranges from $25 to $48 for a dishonoured payment.
What are the consequences of a dishonoured payment fee?
On top of the frustration of being out nearly $50 just because of a payment error, there are other negative consequences of a dishonoured payment fee.
A late or missed payment can have a significant effect on your credit score and, over time, if the behaviour happens repeatedly, it could damage your overall financial health. This is true because credit card companies will report late or missed payments to Canada’s credit bureaus.
These credit bureaus use complex algorithms to calculate whether or not you are creditworthy, based on all the information creditors send them about how you are managing your credit accounts. Payment history is one of the most important factors in determining your credit score, and late payments can stay on your credit report for up to six years in Canada.
Repeated dishonoured payments can lead to a continual decrease of your credit score, which in turn will impact your overall financial health because a poor score can make it harder to obtain credit cards, loans and mortgages and make it difficult to get good rates when you do borrow funds. It’s also likely that, if you continue to miss payments, the credit card company will suspend or cancel your account.
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Find Your Card NowHow to avoid paying a dishonoured payment fee
Here are some helpful tips to avoid paying a dishonoured payment fee:
- Monitor your finances: Regularly check your bank account balances to ensure you always have sufficient funds in your accounts to fully cover upcoming payments.
- Request extensions: If you can foresee that you’re likely to have trouble making an upcoming payment, contact your credit card provider to request a payment extension. Many credit card companies in Canada have also started to offer payment plans that are specifically designed to make it easier to pay off big purchases by dividing them into smaller amounts over an extended period of time.
- Cancel automatic payments: If you can’t keep a set amount in your bank account and your balance tends to vary often, don’t sign up for an automatic payment plan with your credit card company. Manually pay your bills to avoid automatic payments bouncing due to insufficient funds and just be sure to write payment due dates in a calendar so you don’t forget to pay the bill.
- Create a budget plan: Establish a budget to manage your finances better and ensure funds are available for scheduled payments.
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