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A bounced check is a troublesome ordeal — not only do you (or your intended recipient) not get the money promised by the writer of the check, you can get hit with a bounced check fee from your bank or credit union. Here’s how to handle the situation if you’ve written a check that bounced or if you’ve received a bounced check.
A bounced check is a term for a check that cannot be processed because the account it is tied to has nonsufficient funds (NSF). When a bank attempts to retrieve the money and comes up short, the check is “bounced” back to the account holder and they are often charged a fee.
A common reason for a bounced check involves someone cashing a personal check with insufficient funds. The check writer usually was simply unaware that their funds were too low to cover the amount on the check. Other times, people can write bad checks in a deliberate attempt to scam others.
If you’ve accidentally bounced a check, there are some simple steps you can take to resolve the issue. Here’s what you should do:
If you’ve received a bounced check, first make sure that check is real. Examine the check for security features, like watermarks, and make sure the check has a legitimate routing number printed on the bottom. Match the information on the check with the information from the issuer. If everything checks out (pun intended), follow the steps below:
Wondering what happens if you bounce a check? Here are the possible outcomes of a bounced check.
Bouncing a check can get quite expensive. Depending on your bank or credit union, you could have to pay a returned item fee — also known as an NSF fee — or an overdraft fee. The difference between the two is small, but important. An NSF fee is charged when you write a check for an amount larger than what is in the connected bank account. An overdraft fee is similar, in that it is charged when a debit is larger than the account balance. The key difference is that when a NSF/returned item fee is charged, the transaction cost is not covered by the bank — hence the term bounced check. When an overdraft fee is charged, the bank does cover the amount of the transaction.
Let’s say you write a check for $100 that ends up bouncing. Not only would you still owe the $100, you’d also owe a NSF fee of up to anywhere from $20 to $40. If your bank charges an overdraft fee instead, you’d likely owe around $30 on top of the $100 that was debited from your account.
A bounced check typically doesn’t impact your credit score. However, if you fail to pay a NSF fee or the amount owed to a company and they report it to a collections agency, your score will be negatively impacted.
If you write multiple bad checks, your bank could close your account. Your bank could also report you to ChexSystems, a company that tracks how consumers use bank accounts and banking systems. Once your negative information is logged in ChexSystems, it will become increasingly difficult to open a new checking account at a different bank.
A bounced check could land you in legal trouble. Each state has its own set of laws, but a deliberately bounced check could result in criminal and/or civil penalties. For example, in New York, if you’re convicted of knowingly writing a bad check, you could face up to three months in jail and a fine of up to $750, depending on the value of the check. If you are prosecuted in civil court, you could be on the hook for the check’s amount, plus lawyer and court fees.
The best way to avoid writing bad checks is keeping detailed records and being mindful of your budget. One bounced check here or there isn’t a huge deal, but if it becomes a habit, it could negatively impact your life in many ways.
Here are some steps to take to avoid a bounced check down the line: