Returned Check Fees: What They Are and How To Avoid Them

You’ve probably heard that not-so-pretty term “bounced check” –– when you write a check that you don’t have the funds to cover. When that happens, the check is returned to your bank or credit union, and you’ll likely be charged a returned check fee, also known as a nonsufficient funds (NSF) fee. These can be up to $50 and can be charged by your bank and the check recipient.

What is a returned check fee?

When you write a check you don’t have the funds for, it will be returned to your financial institution unpaid ––and you’ll likely be charged a returned check fee, also known as a NSF fee.

Unfortunately, the recipient may also be charged a fee by their bank for attempting to deposit a bad check. That’s why the payee may also charge you a returned check fee for what it cost them in the process.

The cost of a returned check

On average, a returned check fee (or NSF fee) can range anywhere from $10 to $50, although several big banks like Wells Fargo, Bank of America, Citibank and Capital One have made changes to their returned item policies, some fully eliminating this fee altogether.

If your bank allows a payment to go through that overdraws your account, you may be charged an overdraft fee. But you typically won’t be charged overdraft fees in addition to NSF fees. Overdraft fees are generally around $35, and if your account remains overdrawn for several days, you can be charged for that too (i.e. extended overdraft fees). According to the most recent data from the Consumer Financial Protection Bureau (CFPB), these fees cost Americans around $15.5 billion back in 2019.

Tip: A returned check fee and overdraft fee can be charged each time the recipient tries submitting it, so move quickly to resolve it.

Other ramifications for bounced checks

There are a few other repercussions you could run into outside of fees:

• Your account may be closed: If you’ve written several bad checks, your bank could close your checking account. This can show up in ChexSystems (a consumer reporting agency) and make it difficult for you to open new accounts in the future. (Second-chance bank accounts are a great option if that’s the case.)
• Your credit could be affected: If a bad check makes you late on a payment, it can be reported by the three main credit bureaus, which may affect your credit score.
• It may get legal: If you knowingly write bad checks, you could owe a fee, be taken to court and face other resulting penalties (depending on the state).

You may be able to avoid these consequences by settling the payment or explaining to the payee why you’re struggling to pay it. Together, maybe you can work something out.

4 steps to resolve the returned check

It’s easy to panic, but there are a few things you can do to quickly handle a bounced check.

1. See if the check cleared: Maybe you could issue a stop payment on the check (i.e. cancel the check) before it clears. It typically comes with a stop payment fee, but at least the check won’t go through.
2. Contact the recipient: Inform the payee of the issue. Prepare to explain how you plan on paying up.
3. Cover the costs: Deposit money into your account to cover the amount of the check and any associated fees. If this is your first bounced check, talk to your bank; they might waive the fee based on a positive banking relationship.
4. Make some long-term changes: Adapt your banking habits so you avoid this trouble in the future. (Consider making a budget.)

How to avoid returned check fees

To avoid these NSF fees in the future, ensure your checking account has sufficient funds to cover the payment. A good way to do this: balance your checkbook (or checking account). This way, you’re aware of any future transactions that may cause your account to go into the red.

Opt into overdraft protection with your bank. Some offer free services in which you can link your checking account to a savings account. If you do end up in a similar situation, the money can be pulled from savings –– you avoid bouncing the check and getting penalized with NSF and overdraft fees. Lastly, keep your eye on your account throughout the month. Before submitting any payment or check, make sure you’ve written or typed everything accurately.