Make sure bounced debit orders don’t add to your pain

Punitive fee charged can be more than R100

Most of us are being forced to live on less as a result of the Covid-19 pandemic. This calls for careful management of money, including making sure our debit orders don’t bounce. 

If you’re unable to honour an authorised debit order due to affordability, you’re within your rights to cancel or stop it with your service provider. Picture: 123RF/SLASNY
If you’re unable to honour an authorised debit order due to affordability, you’re within your rights to cancel or stop it with your service provider. Picture: 123RF/SLASNY

When a debit order bounces due to insufficient funds in your account, banks typically hit you with a punitive fee. The fee can be a flat fee per returned debit order or it can be charged according to a tiered structure, where your fee escalates in line with the number of unpaid debit orders in a year. 

The fee for a “dishonoured” debit order can be as high as R150 if you have a Gold or Premium account with Absa and have had three unpaid debit orders in a 12-month cycle.

Cowyk Fox, the executive head of Everyday Banking at Absa, says that the banking industry has developed strategies aimed at helping customers with cash-flow constraints and these should also reduce the probability of returned debit orders. 

He says if you’re unable to honour an authorised debit order due to affordability, you’re within your rights to cancel or stop it with your service provider. “In fact, it’s the recommended action to take. 

“You should, in these times, pay particular attention to your financial planning to make adjustments to your budget to minimise the overall impact on your life, and also to avoid unnecessary risks, such as the loss of insurance cover, credit bureau profile deterioration and avoidable costs.” 

Fox says that if you’re doing fewer transactions due to financial distress, a pay-as-you-use bank account may be more appropriate for you than a bundle, because you are less likely to use all of the free transactions in the bundle. 

He says if you want to change your way of transacting you can migrate accounts from an existing package to any of the savings or cheque options without any change to your account number. This means there is no need to change debit order instructions or account details with your employer or third parties.  

“This gives you the ability and flexibility to manage your banking fees based on your usage requirements and financial situation,” Fox says.

He says Absa has not yet seen a material shift, as expected, in the number of returned debit orders or debit order disputes since the start of lockdown in March.

Charl Nel, the head of communications at Capitec, says the bank has seen a decrease in the number of bounced debit orders - in May the bank recorded about half the number of bounced debit orders recorded in November last year. 

“Consumer spending is more frugal during this time, with a 23% decrease in the overall number of debit orders presented to our clients for payment when compared with November 2019.” 

Yashen Singh, the chief executive of Premium Core Banking at FNB, says during lockdown and for customers that applied for relief, FNB waived a portion of unpaid fees incurred from bounced debit orders. This was in addition to waiving  Saswitch fees over the same period.

A source told Money that the Banking Association of South Africa (Basa) is in talks with the banks about waiving bounced debit order fees for a season. Basa did not respond to a request for comment.

To help FNB customers avoid incurring fees for bounced debit orders, Singh says the bank is currently running a campaign aimed at customers with upcoming debit orders who may have insufficient funds based on their balance.

He says these customers are advised that they may incur penalty fees, and of the options available to them to solve this short-term liquidity problem.

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