What to Know About Returned Checks and Their Fees

Also known as a bounced check, a returned check is one that the bank has not honored. This is usually because there aren’t sufficient funds in your account.

Regardless of why the check was returned, you may owe a returned check fee. Let’s dive deeper into what a returned check fee is, how much it may cost you and what you can do to prevent these fees in the future.

What is a returned check fee?

If you write a check but don’t have enough money in your checking account to cover it, you may have to pay a returned check fee. A returned check fee is charged by the recipient of the check as a consequence for attempting to distribute funds that you simply do not have. When this happens, the recipient of the check may also be charged by their financial institution, so a returned check fee covers the merchant’s recovery costs.

In addition to the returned check fee charged by the merchant, you may also owe a returned item fee, also called a non-sufficient funds (NSF) fee, to your financial institution.

How much could you owe if a check is returned?

If you bounce a check, the fees can add up fast. As mentioned above, the merchant could charge you a returned check fee to cover their recovery costs. There are state-specific limits to these fees, and they typically range between $20 and $40. Some states also permit merchants to charge a percentage of the check’s amount. In Ohio, for example, you could owe $30 or 10% of check amount, whichever is greater.

You also may have to pay an NSF fee to your financial institution if you wrote a check and don’t have enough money in your account to cover it. While returned check fees and NSF fees vary, their amounts are usually fairly comparable. NSF fees typically average around $30.50 according to a 2019 study by DepositAccounts.com.

Based on the average amounts charged for each fee type, let’s say the merchant charges $30 for a returned check fee and your bank charges $30.50 for an NSF fee. In this case, you may have to dish out a total of $60.50, which is a lot to pay for a returned check.

For more information on the types of fees you may be charged in the instance of a returned check, visit your bank or credit union’s website. If you don’t find what you’re looking for online, give them a call and ask for clarity.

What happens when a check is returned?

Fees aren’t the only consequence of returned checks. You may also face the following repercussions:

• Your bank or credit union may notify you and report the incident to ChexSystems: ChexSystems is a reporting agency that tracks your banking activity and evaluates your risk for opening new accounts. A bad notation with ChexSystems can keep you from getting approved for credit cards, loans and other products down the road.
• Your account may be closed: If bouncing checks becomes a habit, your bank could close your account. An account closure, coupled with a series of bad marks on your ChexSystems report, could make opening a new account at another bank difficult.
• You may face legal trouble depending on the state in which you live: Laws vary from state to state, but you could owe a fee and even face jail time if you knowingly wrote a bad check.

To minimize the consequences of a bad check, reach out to the recipient and explain that you don’t have enough money to cover it. You can work together to come up with a solution.

How to avoid return check fees

While returned check fees are frustrating, there are several steps you can take to avoid them in the future. In order to do so, you will want to evaluate your banking habits and also look at any safeguards you can put in place to prevent overdrawing your available funds in the future.

• Pay attention to your account balance: Make sure you always know how much money is in your account. You may want to set up low balance alerts so that your bank or credit union notifies you when you’re at risk of overdrafting.
• Get overdraft protection: The cost of overdraft protection through your financial institution is often worth it because the fees are lower than what you’d pay if you were to overdraft your account.
• Link your checking and savings account: If you use the same bank for checking and savings, you may want to link these two accounts. This way your savings account can cover any overdrafts that you may accidentally make in your checking account.
• Only write checks when you have the funds in your account: If you’re expecting funds in your account and write a check before they hit it, you may face a return check fee. So it’s a good idea to wait until the money is in there before you write a check.
• Keep your spending in check: The more you spend, the less money you’ll have in your account. If you have a tendency to overspend, create a budget and get rid of any unnecessary expenses, such as coffee shop visits or unused memberships.