Contents
On the pages of our website, we have already written about overdraft (overspending), which is a type of short-term lending, and allows you to spend an amount that exceeds your own funds on the card within the limit set by the bank. It can be connected to any debit card. You can also read a detailed review of the bank overdraft card.
But it turns out that even if you are not going to connect this service, then in some cases you may encounter it, and it will be a surprise to you. We are talking about a technical overdraft. Let's analyze what it is, what are the reasons for its occurrence and consequences, and what recommendations should be followed in order not to face this unpleasant phenomenon.
Technical overdraft. What it is?
Technical overdraft (also called unauthorized overdraft) is the excess of the available balance on the card account when making purchases from a card or any other operations (cash withdrawals, transfers, etc.). In other words, for certain reasons more is withdrawn from the card than is available on the account, and the balance goes into a “minus”. This kind of unforeseen situation can occur with a debit or credit card, which is why it is also called an unauthorized overdraft.
It turns out that the cardholder at the time of such an unauthorized situation temporarily borrows money from the bank, i.e. takes a "technical" loan without his desire and consent. And since the loan is not authorized (on your card it simply may not be provided or its value exceeds the credit limit on a credit card), please pay for it, because we ourselves, through our own oversight or ignorance, drove our balance into a minus! And the most interesting thing is that banks provide for payment for such an unauthorized loan in their tariffs - now it will not be a surprise for you.
Reasons for the occurrence of an unauthorized overdraft
Let's consider the main reasons for the occurrence of an unauthorized technical overdraft:
Withdrawing cash from an ATM of someone else's bank . If you withdraw money from the ATM of your bank that issued your card, then, as a rule, you will not be charged a commission (we are talking in this case about debit cards). With the same operation, but in a third-party (someone else's) ATM, the commission is usually charged by your bank and the bank that owns the ATM. For example, you have $ 100 on your account, and the fees of both banks will be 1% per withdrawal (conventional value). You want to completely reset your account. Then you will withdraw from someone else's ATM (100 - 1%), i.e. $ 99 ($ 1 will go to your bank), but at the same time you will owe the same 5 rubles to the credit institution whose ATM you used. Thus, your balance will have a negative amount (-5 rubles), which is an unauthorized overdraft.
Incorrect work of the processing center or terminal failure at the point of sale . In this case, when paying by card, the same amount can be debited 2 times, i.e. there will be a double write-off. If this happens, it is mainly a technical problem with the acquiring bank or the card payment terminal at the point of sale. Sometimes the seller can be wrong too. Of course, after considering the client's application, this amount will be returned, but the bank, most likely, will not write off the interest for the use of an unauthorized loan that arose for technical reasons. You simply did not have enough funds on your card to re-pay, but for your bank this will be considered an unauthorized overdraft.
Exchange rate difference during conversion. You withdraw (or make a payment) today money in a currency other than the currency of the card account and forget about the commission that the bank must take for the conversion. Or it happens that at the time of the actual withdrawal of funds from the account (this usually happens after a few days), the currency exchange rate rises sharply and is debited with a minus amount that you did not expect.
Annual maintenance fee and other commissions. The agreed amount for maintaining the account is debited annually. If at the time of debiting there are no funds on the account, it will also go into negative territory. If you do not use the card, it is advisable to write an application for closing the card.
Exceeding the credit limit on credit cards . If you are a holder of a credit card, and one of the situations described above has occurred, then the credit limit on your credit card may simply not be enough - you will take more from the bank than is required by the terms of service of the card. This means that you will have to pay a fine for exceeding the credit limit.
Authorized and unauthorized unauthorized overdraft and its consequences
The main danger of an unauthorized overdraft is increased interest rates for using bank funds. If we compare the rates for using an overdraft and a credit card, in the second case, they are usually lower. That is why, even at the stage of issuing any card, it is worth asking clarifying questions to the bank manager and carefully reading the agreement, since it may indicate the conditions for the occurrence of the envisaged unauthorized overdraft.
For example, bank takes 40% per annum for unauthorized overruns, and Tinkoff, using his well-known credit card, is content with paying for the use of funds in excess of the debt limit ($ 5 is withdrawn once a month if an excess was recorded).
The interest (punishment) can be even more serious. You also need to take into account the requirement of banks to pay off uncoordinated cost overruns as soon as possible, together with accrued interest.
If the agreement states that the client will perform any operations with a bank card only within the limits of the balance on the account, then in this case the overdraft is considered unforeseen . Those. "Financial responsibility" for it is not provided for in the contract. In this case, interest will be charged on cost overruns in accordance with "Liability for failure to fulfill a monetary obligation" (at the average rate in your region).
And the legality of accrual of interest is regulated by "Reimbursement to the victim of lost income", which says that:
Precautions
How to protect yourself from paying decent interest on funds that you did not expect to borrow? How to use cards effectively in order to prevent the cause of a technical overdraft? What are the measures of personal financial security?
The answers to all these questions lie in only one concept: financial literacy. Even basic knowledge of the rules for using bank cards will help bank customers navigate the nuances of agreements when opening cards, and also make a decision on their closure in time. But even in such a situation, you cannot be 100% sure that you will not face an unauthorized overdraft. The following recommendations will help to minimize the likelihood of such a situation:
- 1. Technical overdraft. What it is?
- 2. Reasons for the occurrence of an unauthorized overdraft
- 3. Authorized and unauthorized unauthorized overdraft and its consequences
- 4. Precautions
On the pages of our website, we have already written about overdraft (overspending), which is a type of short-term lending, and allows you to spend an amount that exceeds your own funds on the card within the limit set by the bank. It can be connected to any debit card. You can also read a detailed review of the bank overdraft card.
But it turns out that even if you are not going to connect this service, then in some cases you may encounter it, and it will be a surprise to you. We are talking about a technical overdraft. Let's analyze what it is, what are the reasons for its occurrence and consequences, and what recommendations should be followed in order not to face this unpleasant phenomenon.
Technical overdraft. What it is?
Technical overdraft (also called unauthorized overdraft) is the excess of the available balance on the card account when making purchases from a card or any other operations (cash withdrawals, transfers, etc.). In other words, for certain reasons more is withdrawn from the card than is available on the account, and the balance goes into a “minus”. This kind of unforeseen situation can occur with a debit or credit card, which is why it is also called an unauthorized overdraft.
It turns out that the cardholder at the time of such an unauthorized situation temporarily borrows money from the bank, i.e. takes a "technical" loan without his desire and consent. And since the loan is not authorized (on your card it simply may not be provided or its value exceeds the credit limit on a credit card), please pay for it, because we ourselves, through our own oversight or ignorance, drove our balance into a minus! And the most interesting thing is that banks provide for payment for such an unauthorized loan in their tariffs - now it will not be a surprise for you.
Reasons for the occurrence of an unauthorized overdraft
Let's consider the main reasons for the occurrence of an unauthorized technical overdraft:
Withdrawing cash from an ATM of someone else's bank . If you withdraw money from the ATM of your bank that issued your card, then, as a rule, you will not be charged a commission (we are talking in this case about debit cards). With the same operation, but in a third-party (someone else's) ATM, the commission is usually charged by your bank and the bank that owns the ATM. For example, you have $ 100 on your account, and the fees of both banks will be 1% per withdrawal (conventional value). You want to completely reset your account. Then you will withdraw from someone else's ATM (100 - 1%), i.e. $ 99 ($ 1 will go to your bank), but at the same time you will owe the same 5 rubles to the credit institution whose ATM you used. Thus, your balance will have a negative amount (-5 rubles), which is an unauthorized overdraft.
Incorrect work of the processing center or terminal failure at the point of sale . In this case, when paying by card, the same amount can be debited 2 times, i.e. there will be a double write-off. If this happens, it is mainly a technical problem with the acquiring bank or the card payment terminal at the point of sale. Sometimes the seller can be wrong too. Of course, after considering the client's application, this amount will be returned, but the bank, most likely, will not write off the interest for the use of an unauthorized loan that arose for technical reasons. You simply did not have enough funds on your card to re-pay, but for your bank this will be considered an unauthorized overdraft.
Exchange rate difference during conversion. You withdraw (or make a payment) today money in a currency other than the currency of the card account and forget about the commission that the bank must take for the conversion. Or it happens that at the time of the actual withdrawal of funds from the account (this usually happens after a few days), the currency exchange rate rises sharply and is debited with a minus amount that you did not expect.
Annual maintenance fee and other commissions. The agreed amount for maintaining the account is debited annually. If at the time of debiting there are no funds on the account, it will also go into negative territory. If you do not use the card, it is advisable to write an application for closing the card.
Exceeding the credit limit on credit cards . If you are a holder of a credit card, and one of the situations described above has occurred, then the credit limit on your credit card may simply not be enough - you will take more from the bank than is required by the terms of service of the card. This means that you will have to pay a fine for exceeding the credit limit.
Authorized and unauthorized unauthorized overdraft and its consequences
The main danger of an unauthorized overdraft is increased interest rates for using bank funds. If we compare the rates for using an overdraft and a credit card, in the second case, they are usually lower. That is why, even at the stage of issuing any card, it is worth asking clarifying questions to the bank manager and carefully reading the agreement, since it may indicate the conditions for the occurrence of the envisaged unauthorized overdraft.
For example, bank takes 40% per annum for unauthorized overruns, and Tinkoff, using his well-known credit card, is content with paying for the use of funds in excess of the debt limit ($ 5 is withdrawn once a month if an excess was recorded).
The interest (punishment) can be even more serious. You also need to take into account the requirement of banks to pay off uncoordinated cost overruns as soon as possible, together with accrued interest.
If the agreement states that the client will perform any operations with a bank card only within the limits of the balance on the account, then in this case the overdraft is considered unforeseen . Those. "Financial responsibility" for it is not provided for in the contract. In this case, interest will be charged on cost overruns in accordance with "Liability for failure to fulfill a monetary obligation" (at the average rate in your region).
And the legality of accrual of interest is regulated by "Reimbursement to the victim of lost income", which says that:
Thus, the bank has the right to demand from the client interest on the unauthorized overspending of bank money by the client.
Precautions
How to protect yourself from paying decent interest on funds that you did not expect to borrow? How to use cards effectively in order to prevent the cause of a technical overdraft? What are the measures of personal financial security?
The answers to all these questions lie in only one concept: financial literacy. Even basic knowledge of the rules for using bank cards will help bank customers navigate the nuances of agreements when opening cards, and also make a decision on their closure in time. But even in such a situation, you cannot be 100% sure that you will not face an unauthorized overdraft. The following recommendations will help to minimize the likelihood of such a situation:
- keep on the card at least 5% of the purchase amount. That is, for example, when paying in a supermarket of household appliances for a refrigerator worth $ 1000, it is advisable to leave at least $ 50 on the card;
- reset the card only when it is closed;
- in case of failures in the terminals, it is worth abandoning the repeated payment attempt. On the same day, you need to use your personal online account (Internet bank) or an ATM to check your account balance. If you suspect an unauthorized write-off, it is also advisable to wait 2-3 days and not use the card during this period. See also the article “How to return money illegally debited from the card?".
