Sometimes last year I moved banks because I was not happy with the service I was getting from my former bank. All I needed was a pre-qualification letter from the bank so that I can go apply for the house and consultant helping me was acting like I needed some sort of loan or something. After a good 2 weeks of waiting, I eventually decided, I do not owe them anything and hence I would just go to another bank.
Off I went to my new bank and then my loan was approved there. This meant that I must move my salary to my new bank account. Fair enough, after all they are helping me so I might as always move all my banking here. For some odd reason, there was broken communication with my HR, and my salary was paid in the new account that month instead of my old account. What happened? All my debit orders bounced.
My debit orders bounced because I changed accounts. But for many people, their debit orders just bounced because they do not have enough money in their account for the time the debit order are suppose to go off. This is sometime because their salary is paid in late or simply because they misused the funds.
Why should you avoid bounced payments?
1. Double deductions can seriously mess up your budget. In my case some of my debit orders deducted from my new account as I later provided them with my new banking details but for my car insurance it never went off and I had to pay double the next month. The worst part is that I somewhat used up the insurance money in the process.
2. Your policies could lapse in the period depending on what your breach term is. Some policies lapse immediately , others may take a few months or so. In event something happen in the month that your policy has lapsed, you may not be covered and you might have an unaccepted expense your way. I had to communicate this in writing to my insurance that they should deduct the money from my new account which means that should I have bumped someone in that month, I had proof to say that I took corrective action.
3. There are heavy fees for bounced policy. I learnt this the hard way. When I went to close my account because I did not need it anymore, I was asked to pay in addition N$400 in addition to a N$300 that was already in the account. Each policy had a bouncing fees including my investment. I was sad but I had to do it.
4. Finally, this could have negative impact on your credit score and will work against you if you are applying for funding. I was just lucky that my policy bounced after my process for the loan approval was already done. So I did not have not worry. But your new lender will take this into consideration when deciding how committed you are when it comes to honoring your payment commitment.
So my advise to you is make sure that your debit orders go off a 2- 3 days after your salary is paid in. If for whatever reason your employer does not pay your salary in on time , you still have a few days to make contingent plans. And do not voluntary skipped payment by moving money in a different account because it will bounce but you will still have to pay it plus additional fees for bouncing as well as interest that accrued on the portion that you have not yet paid.
The best thing is to budget and ensure that there is sufficient fund in your account for your orders to go through.