credit card problems


Checking Account Affects Credit Rating

Are you aware that a  simple checking account can have affect your credit rating?  One or two checks returned for insufficient funds by your bank over a period of time is not likely to hurt you.  For those who seem to always run out of money while there still month left - multiple bounced checks can harm your creditworthiness...continued below

This can make it next to impossible to open an account at another bank and if insufficient funds are a frequent problem, you may find stores rejecting your checks for payment.   Companies such as TeleCheck track bad check habits and when your local merchant inserts your check into the counter top machine that prints deposit info on the back of the check, they are relaying your information to a company such as TeleCheck.  If you have been writing more checks than you can cover, they will be told to decline your payment.

We all make mistakes and it's important to understand how the insufficient funds system works.   Many banks and credit unions will automatically deduct any overdraft from your savings account and transfer it to checking to cover the payment.  The charge to you is minimal and if your bank does that - and you have some funds in savings - you're off the hook if you made a subtraction error on your check register.  With most financial institutions, it's not so easy.

A check presented for payment (which is now done quickly and electronically) is declined for insufficient funds.  Your bank will send you a letter and if you add funds quickly it's not a huge problem.  The merchant will resubmit the overdraft a second time and if it goes through, you're ok.  It's an expensive error because banks charge hefty return fees and it's common to have as much as $35 taken from your account to pay for your error.

The big problems begin when there is not enough to pay the second time the check is submitted.  You must then pay the merchant directly (he'll want cash) and you will incur a second charge at your bank.  In addition, the merchant will also have a "return charge" of $25 or more. 

Returned a second time, this is listed as a "bad check".  If you wrote a $30 check and your balance was $28 – and if you don't quickly make a deposit – you could end up paying well over $100 for you error.

If several checks were denied, these fees can quickly escalate into a financial crisis and this will damage your credit rating.

It's much wiser to use your checking account responsibly and to your advantage.

* Know how much is in your checking account.  Don't simply log your checks and neglect to subtract them from the balance available.

* Reconcile your account balance each and every month when you receive your bank statement.  This needn't be a major task - add up deposits and
   subtract checks written and remember to include those that have not yet cleared.

* If you plan to open a new checking account, do it before closing the old one.  A second bank account is easier due to tightened restrictions.

* When transferring funds from an old to a new bank, don't withdraw all of your money till you are certain all outstanding checks have been paid on the
   old account.  Though most clear quickly, some payments for things such as magazine subscriptions may take weeks to be presented for payment.

Using your checking account wisely is one step you can take to protect your credit rating and credit history.