Overdraft commission – What is it, definition and concept | 2022

An overdraft commission is a payment that the holder of a bank account must face in situations of negative balance as compensation to his bank.

Banking entities establish an overdraft commission for clients who present overdrafts in their checking accounts at a given time or continuously.

In this sense, it is the bank that would have to assume or block different payments or direct debits that the client could not cover in said situations.

For this reason, it will apply to the account holders a sanction amount added to certain interest or additional costs for delays in payment.

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For this reason, these institutions try to encourage their clients to avoid red numbers in their account through commissions that punish or penalize overdrafts.

These overdraft charges often entail a high cost from the point of view of depository customers, compared to other types of existing commission.

Outstanding features of an overdraft fee

Beyond the concept explained above, this type of commission has some other features to take into account:

  • Default amount: The commission charged in an overdraft situation must be defined in the offer prior to the agreement that is transferred to the client.
  • Formal regulation: Each territory establishes in its legislation some ratios or quantities. Usually these costs are between 15 and 50 euros depending on various factors.
  • Temporary margin: It is possible to apply this type of commissions to negative balances, both punctual and long-lasting in a certain period of time.
  • Additional costs: In many cases, banks add other commissions in cases of late payment.
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The fee for overdraft on a day-to-day basis

This type of mechanism in account overdraft situations is associated with commonly negative connotations.

However, the banks, in these cases, respond to the situation of debt contracted by the client. In other words, in a situation of negative balance, it is the entity that must respond to the different payment commitments that said account may have.

This is highlighted in cases of individuals or organizations with little liquidity margin, but with regular movements or commitments to satisfy.

In this way, it is possible to avoid sanctions by the Administration or possible seizures. The account holder should only respond to his bank.

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