How to Handle a Bounced Check

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.

Why does a check bounce?

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.

What to do if you’ve bounced a check

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:

1. Contact the check’s recipient: Once you realize you’ve bounced a check, immediately contact the bank, company or individual who received the check. Inform them of the situation and be prepared to discuss how you’re going to remedy the bounced check.
2. Make the payment: You’ll want to arrange a payment to cover the check’s amount and any associated fees, like a returned check charge. If you now have the correct amount of money in your account, you can ask the recipient to redeposit the check. A returned check can be deposited again, but generally only once.
3. Pay your fees: After making good on the payment, you’ll want to pay the fees coming from your bank or credit union. Depending on which state you live in, you’ll be paying a maximum NSF fee of between $20 and $40. If this was your first bounced check, contact your bank and ask them to waive the fee. Banks will often oblige, especially if you’ve been a good customer.
4. Make changes to your banking habits: With the matter safely handled, you might consider reviewing your banking habits as a whole to make sure you don’t have to deal with this again in the future. We’ll give you some tips on how to do that below.

What to do if you’ve received a bounced check

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:

1. Contact the sender: As soon as possible, contact the person or company who sent the bounced check. Try to remain unemotional as you explain the circumstances. Politely ask the check issuer for payment. If they comply, then great. If not, you’ll have to take additional actions to settle the matter.
2. Wait and redeposit the check: The check issuer may ask you to simply wait a few days and redeposit the check. If you can, try to cash the check at the issuer’s bank so that if it bounces again, you won’t get hit with another NSF charge by your bank.
3. Send a “bad check” demand letter: If you’re having trouble getting a response from the check issuer, send them a bad check demand letter. This is a formal request for payment, sent by certified mail to the issuer. In the letter, include as many details as possible. Here’s a template you can follow to help get you started.
4. Consider taking legal action: When all else fails, you can sue the check issuer in small claims court. The terms of suing in small claims court vary by state, but generally you can sue for up to a few thousand dollars. When you go to court, make sure to bring as much documentation as possible, including the bounced check, correspondence between you and the issuer, the certified demand letter and more.

Potential consequences of bouncing a check

Wondering what happens if you bounce a check? Here are the possible outcomes of a bounced check.

You’ll owe bounced check fees

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.

You could hurt your credit score

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.

Your account may be closed

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.

You could face legal trouble

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.

How to avoid bouncing checks in the future

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:

• Know how much you have in your account: Keep detailed records of your bank account. You can even use an app to help you stay in the know. Set up notifications that alert you when your bank account drops below a certain point.
• Regularly balance your account: Use an app or a spreadsheet system to budget your money, which will in turn keep your account balanced. If need be, keep an extra $100 or so in your account for extra padding each month. If you find that your account is often unbalanced, review your budget and trim unnecessary expenses.
• Consider overdraft protection: You might want to consider signing up for your bank’s overdraft protection. With this service, your bank will cover the cost of your transaction even if you don’t have the funds. However, the coverage comes with a fee. A better idea might be to tie an additional account — like a savings account — to your checking account, so that the funds are withdrawn from there instead of getting hit with a fee.