Depending on the state’s lending laws and the contractual agreement with your payday lender, you may be charged some fees for failed debits.
Your payday lender may charge a late and returned payment fee if you do not have enough money in your account when they attempt to automatically debit your account, while your bank or credit union may charge a non-sufficient funds fee for the same reason.
Read your loan agreement through and through to know what fees are included in your loan terms.
When taking out a payday loan, you are usually required to sign a contract or agreement before getting funded. This loan agreement contains everything worth knowing about the loan, including how it should be repaid.
How Do Payday Loan Repayments Work?
The most common forms of repayment include paying in person at the payday lender’s storefront, issuing a post-dated check the lender can cash and an Automated Clearing House (ACH) authorization.
The latter involves automatic debits of the borrower’s bank or credit union account to service the debt. If you agree to this but do not have enough money in your account when the lender tries to repay itself, your bank or credit union may cover the payment and charge you an overdraft fee.
If they do not cover the payment, you may be charged a non-sufficient funds fee by your bank or credit union. You can avoid an NSF fee by applying for overdraft protection from your bank or linking a savings account or credit card (as a backup account) to fund the insufficient account.
How To Be Clear About My Payday Loan Fees?
Lending laws differ from state to state on what kind of fees may be charged. Some state laws specify the maximum amount a lender can charge for these types of fees and the number of times these fees may be charged.
If you are a little unclear about the fees and charges on a payday loan you have previously taken out, you can request a payment history or amortization schedule from the lender. These documents should give you a clue about any fees, charges and how your payments were allocated.
To avoid NSF fees:
- Link multiple accounts so they can cover shortfalls in the account that covers ACH payments
- Monitor your debit card transactions and account balances
- Consider applying for overdraft lines of credit, bank products designed to help borrowers cover any issues relating to insufficient funds
- Properly budget for monthly payments
- Consider setting up low-balance alerts if your bank has such provisions. This can help you know when your account balance is running below a specified figure and you can adjust your expenses accordingly.