What Happens if You Never Pay Your Overdraft Fees?

Overdraft fees are never fun, but unfortunately, they’re something many bank customers have dealt with. We all know it’s best to pay them back as soon as possible, but what happens if they keep piling up and you never deal with them?

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Let’s examine some of the potential consequences.

Declined Payments

Fairly common, this is when the bank refuses to cover additional overdrafts to prevent you from accruing further debt and fees. 

Increased Fees

If you continually overdraft your account and do not pay the fees, the fees may increase, adding even more to the balance you owe. Additionally, some banks may include daily overdraft fees, or continuous overdraft fees, where an extra fee is added every day you are overdrawn.

Bank Account Closure

If you repeatedly overdraft your account and do not pay the fees, the bank may close your account, making it difficult for you to access your funds and open a new account at another bank.

Difficulty Opening a New Bank Account

Banks will be far less likely to approve you for a new account if you have a history of not paying overdraft fees.

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Negative Impact on Credit Score

Overdraft fees that are not paid can be reported to credit bureaus, which can negatively impact your credit score. It can be difficult to obtain new credit, as banks and lenders may view you as a high-risk borrower. This will also likely result in increased interest rates on future loans or credit cards.

Collection Agency Involvement

When the bank has been unable to collect the debt you owe they may hand the situation over to a third-party collection agency for further action. This usually happens after you have failed to pay overdraft fees or other debts owed to the bank for an extended period of time.

Once the debt has been sent to a collection agency, the collection agency will take over the responsibility of collecting the debt and will take steps to recover the funds owed. This may include calling you, sending letters, or even taking legal action.

The collection agency will also report the debt to the credit bureaus, which can negatively impact your credit score. In addition, the collection agency may take legal action to collect the debt, such as filing a lawsuit or garnishing your wages. If a lawsuit is successful, you may be ordered to pay the debt, plus any legal fees and other associated costs.

Strain on Personal Relationships 

Overdraft fees can create financial stress and a strain on personal relationships, particularly if you are unable to pay other bills or debts. This can lead to disagreements and tensions.

If you have a history of not paying overdraft fees, you may be seen as unreliable and untrustworthy. Friends and family members may be less likely to lend you money or provide financial support in the future, which can damage your personal relationships.

You might start to avoid social situations, such as family gatherings or friend’s events, as you may feel embarrassed or ashamed about your financial situation. This can lead to social isolation and put further strain on your life.

So, all in all, it is best to pay those overdraft fees if you’re able. If you find the entire situation overwhelming and you just want to ignore it, that’s understandable. However, a better course of action would be to contact your bank to see if you can get them waived — and then turn off the overdraft feature on your account so you can never incur them in the first place.

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This article originally appeared on GOBankingRates.com: What Happens if You Never Pay Your Overdraft Fees?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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