DEFINITION of 'Returned Payment Fee'

A charge a credit card company may assess to a customer’s account if the customer attempts to pay a credit card bill with a check that is returned unpaid. Returned payment fees discourage credit card customers from submitting checks that they know will not clear because their checking account has insufficient funds. A credit card customer might otherwise submit a check that won’t clear to try to avoid incurring late payment fees and interest by creating the appearance of having paid the credit card bill on time.

BREAKING DOWN 'Returned Payment Fee'

To find out whether your credit card has a returned payment fee and how much it is, check the card’s terms and conditions. They will typically specify a returned payment fee of “up to $35.” If it’s your first returned payment, the fee might be lower — perhaps $25. If your minimum payment due was only $10, your returned payment fee might be just $10. Otherwise, you will likely pay the full $35. Sometimes you can convince the credit card company to waive the fee if you’ve never had a returned payment before and your account is in good standing.

A returned payment fee often comes along with late payment fees and interest. If you try to pay your credit card bill at the last minute but your check doesn’t clear, your minimum payment becomes overdue and you will owe a late fee if your credit card’s terms and conditions permit it. A few credit cards do not charge late fees at all or will waive the late fee the first time the customer has a late payment, but most charge late fees of $25 or $35. Even if a late fee doesn’t apply, interest charges will almost always apply, and possibly an increased interest rate, if your returned payment means that you’ve missed your minimum payment deadline. Further, your bank will probably charge you an insufficient funds fee (NSF fee) for writing a check that couldn’t clear.

If you know you won’t have enough money in your checking account to cover your credit card payment by the due date, don’t send the credit card company a check. You’ll still have to deal with late fees and interest, but at least you won’t have a returned payment and NSF fee on top of that.

Returned payment fees could also be termed “returned check fees,” but since many customers now make online payments and do not pay by check, “returned payment fee” is more common. You might incur a returned payment fee by accident if you’re paying your bill online and enter the wrong checking account or routing number, or if you’re using your bank’s online bill pay system and you enter your credit card account number or the creditor’s payment address incorrectly. To avoid a possible returned payment fee because of a mistake like this, always double check the information before submitting your online payment. To avoid a late payment fee because of a typo, schedule your payments to arrive several days before they are due, then make sure they post to your account.

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