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What Happens if My Card Payment Is Returned?

A returned payment could lead to severe penalties, including fees, higher APRs and damage to your credit score.

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A returned credit card payment can lead to a series of financial headaches, including punitive fees, higher interest rates and a lower credit score if it’s not rectified quickly.

Here’s how a returned payment can impact your finances, how to avoid one and what to do if your payment is returned.

What could cause a returned payment?

If you make a payment or your credit card issuer goes to withdraw one automatically, but you don’t have sufficient funds in your bank account, the payment may be returned. If you make an error when entering your banking information or if you switched banks and forgot to update your payment information, this can also lead to a returned payment. 

When this occurs, your credit card issuer and bank may charge an additional fee.

Consequences of a returned payment

Returned payments can come with a few lasting and costly impacts. Here are a few:

Bank and credit card fees

A returned payment will likely result in paying additional fees that can add up quickly. 

“If the payment is rejected, you might be charged two fees: one by the credit card company and one by your bank,” says Ted Rossman, a senior industry analyst for Bankrate.com, CNET’s sister site. Since your payment also failed, this may lead to a late bill, which can lead to additional penalties, not to mention potentially falling behind on your payments, Rossman said.

If your bank lets the payment go through, you may be charged an overdraft fee or nonsufficient funds fee -- which varies from bank to bank. However, many major banks –  including Bank of America, Citi, Capital One and Wells Fargo --  have done away with predatory fees like nonsufficient fund fees, but some of these banks still charge overdraft fees.  If you want to avoid these fees, you may be able to enroll in overdraft protection, if your bank offers it, or find a bank that doesn’t charge overdraft and NSF fees

Credit card companies are not allowed to charge a returned payment fee and a late fee for the same transaction, said Rossman. But you can expect to be charged one or the other. The fee varies depending on the credit card issuer. The first offense is usually $30 and can be up to $41 for other returned payments within six billing cycles, says Rossman. “Most card issuers tend to gravitate toward the higher end of these limits.”

A dip in your credit score

If your payment is returned and you don’t pay it within 30 days, it’ll count both as a late payment and a missed payment, which can hurt your credit score if the issuer reports the missed payment to a credit bureau. The missed payment can stay on your credit report for up to seven years. 

If the payment isn’t made within 30 days, a penalty annual percentage rate could be applied to your account -- up to 29.99%. The returned payment can lead to other repercussions, as well, including losing some of your earned rewards or ending a promotional introductory period early.

If the issue persists, the credit card issuer may lower the credit limit available or cancel the card and demand immediate payment. 

How to avoid a returned payment

You can avoid a returned credit card payment by making sure you have enough money in your bank account to cover the payment in full. 

“To avoid returned payments and late fees in the future, you might want to consider setting up automatic payments or reminders to keep track of your due dates,” says Bruce McClary, senior vice president of membership and communications for the National Foundation for Credit Counseling, a nonprofit credit counseling agency. 

But if your wallet is tight and you can’t afford to pay the bill in full, try to make the minimum payment to keep your account current. You can also call your credit card issuer to let them know if you’re experiencing financial hardships. If you let your issuer know sooner, rather than later, you may qualify for assistance and can protect your credit score. You may be able to temporarily get a lower interest rate, or the issuer may lower your minimum payment or push back your due date to give you more time to make the payment. 

Lastly, nonprofit credit counseling or debt relief agencies can help tackle financial challenges, adds McClary. Here’s a list of approved counseling agencies from the Department of Justice.

The bottom line

Having your credit card payment returned can be costly and inconvenient. It’s important to act quickly to fix it before more severe consequences take place -- like additional fees and damage to your credit score. 

 

Before you make a payment, double check that your account information is correct and the funds are available. You may also try to budget for upcoming payments ahead of time. If you’re unable to make a payment, make a plan with your credit card issuer as soon as you can.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

Evan Zimmer has been writing about finance for years. After graduating with a journalism degree from SUNY Oswego, he wrote credit card content for Credit Card Insider (now Money Tips) before moving to ZDNET Finance to cover credit card, banking and blockchain news. He currently works with CNET Money to bring readers the most accurate and up-to-date financial information. Otherwise, you can find him reading, rock climbing, snowboarding and enjoying the outdoors.
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