In this day and age, businessmen and the 4 types of entrepreneurs are using banks in any transactions they do. They know how convenient a banking transaction could be if they used it. These entrepreneurs value why is time management important to them because they consider time as gold, and each minute for them is valuable. Moreover, different business transactions always use banks as their mode of payment or negotiations. Payment is essential in every transaction you do, whether it is about business or organizations.
What is Returned Item Fee?
When your financial institution declines or returns a transaction due to insufficient funds, it assesses a returned item fee, commonly known as a nonsufficient funds (NSF) fee. The standard cost for each returned item ranges from $27 to $40. Additionally, returned item fee may be assessed if an account has insufficient funds to cover your transfers, withdrawals, and checks. Even though these fees are standard, they can add up and indirectly cause credit problems.
Payments made with debit cards or checks may be subject to these fees. A “bounced” or “bad” check is a check that has been written against an account that does not have enough money in it to cover the payment. In addition, a bank can reject a payment when a check bounces and then charge the account holder a returned item fee.
How can it affect Business?
Returned items can cost your company money, harm its reputation, and have an adverse effect on future transactions. Furthermore, many businesses strive to be successful and come up with success quotes for businesses. On the contrary, learn how to avoid returned item fees and what they mean for your business if you want to keep up a good credit rating and avoid paying unnecessary expenses.
Financial Impact
The returned item fee can add up quickly if you have numerous declined transactions. Some banks charge multiple returned item fee in a day if several items are returned. Moreover, in this example, Chase’s business checking can charge up to six insufficient funds fees per day at $34 each, costing you up to $204 per day. Bank of America can charge up to four per day at $35 each or up to $140 per day.
Business reputation
Late payments from declined transactions frequently have an adverse effect on your interactions with suppliers, customers, or sellers. Furthermore, if your company develops a bad reputation for writing negative checks, other companies might stop doing business with you in the future.
Future banking activities
Although returned and bounced checks don’t directly affect your credit score, they can have a negative impact on your ChexSystems report, which many US banks use to assess the risk of your business. Moreover, banks might decline to let you open a bank account if you have a terrible ChexSystems report.
Account closure
Your bank may close your account completely if your business has too many returned items. Furthermore, accounts closed due to the returned item fee can often be turned over for debt collection, which could end up damaging your credit.
How to avoid returned item fees
Although everyone is trying their best to avoid the returned item fee, it would be an advantage for you to know in an event or happenings that you accidentally wrote a wrong check. Moreover, here are the different ways to avoid returned item fee:
Monitor your account regularly
It’s important to regularly monitor your balance to make sure you have enough amount of money in your account to support your check transactions. Furthermore, you can check the balance of your accounts while on the go with online and mobile banking.
Track your financial transactions
Compare your account balance to your check transactions and automatic payments. Moreover, ensure your account has enough money before you write checks or before your direct debits are due.
Sign up for a balance alert
Some banks let you set up email or text alerts for your phone to let you know when your account balance drops below a certain level. Furthermore, having balance alerts may assist you in identifying questionable charges.
Deposits extra funds in your account
Set a minimum target balance to act as a safety net against a lack of funds. Make regular money deposits to keep your account balance within this desired range. Moreover, whenever your balance drops below your goal, add more money as soon as possible.
Sign up for overdraft protection
Most banks allow you to enroll in overdraft protection when you open a business bank account. To cover any transaction against insufficient funds, your bank transfers money from your line of credit, saving account, or credit card when you have overdraft protection. Furthermore, overdraft protection can protect you from paying returned item fees and damaging your business relationships, the services are typically charged at a cost.
Choose a bank without NSF fees
Some distributors waive NSF fees. Moreover, Bluevine, for instance, rejects various transactions due to insufficient funds but levies no fees for the error.
Use backup sources
Connect your checking account to a savings account or other emergency fund. Furthermore, you’ll have to pay an overdraft fee to withdraw money from it, but eventually, this will be less expensive than a fee for an overdraft on a loan or an NSF fee.
Access your money on time
It’s possible that your paycheck was delayed, which is one of the reasons you need more money in your account than you had expected. You rely on fast deposits to make your payments on time, but you’re reluctant to approach your employer too frequently for an advance. Moreover, you can access your payment whenever you want and make payments using an app like Earnin. You won’t be charged for a returned item, and when your paycheck comes in, you can pay the app back with no additional fees.
Budget carefully
Your best option to avoid a returned item fee after earning considerable money is to create a careful budget. To determine how much cash you have at any given time, balance your checkbook and accounts. Furthermore, your online banking statement and other apps can be helpful, but it’s always a good idea to double-check before placing too much trust in the number they show. You can learn how to manage your money well using apps like GoodBudget and Cleo
Takeaways
Repeated returned item fees can affect and damage your business finances, banking account, and reputation. So you must try your best to avoid those returned item fees on your premises. Moreover, to prevent that, you should have time to check your account balances and ensure that you have secured enough money to cover all the expenses.
