What Is A Bounced Check and the Fees Associated

First and foremost, what is a bounced check? Simply put, it’s a check that cannot be processed because the account holder has non-sufficient funds. If this happens, the bank will reject the payment request and return the check to the payee’s bank.

It is very important to stay educated on the topic just in case your check bounces. Keep reading to learn more about bounced checks and the fees associated with them.

What is a Bounced Check?

As mentioned previously, a bounced check is a check that was used for payment, but it could not be processed because the check writer didn’t have sufficient funds available to fund the payment.

When an account has insufficient funds, the check writer’s bank will reject the payment request and return the check (or the electronic request) to the payee’s bank. Instead of sending money to the payee, the request for payment “bounces” back.

It is also important to note that if you receive a check that bounces, you’ll also have to pay for depositing a bad check, even if it wasn’t your fault. In some cases, you can pass those charges on to the check writer, but you have to follow certain rules to collect those funds from the check writer.

Why Checks Bounce

When people pay by check, trust must be involved since payment is not immediate. The payee doesn’t know how much money the check writer has available for spending. In other words, merchants and service providers accept checks assuming the checks will clear without any problems.

• You can write anything: Even if you don’t have a specific amount in your checking account, you can write a check for whatever amount you want. However, writing rubber checks intentionally is illegal, but it is easy to do.
• Accidents happen: Checks can bounce by accident if the check writer believed they had the funds available, but unexpected withdrawals reduced their balance. An example of this would be automatic electronic payments, outstanding checks that hit an account unexpectedly, and large debit card holds can cause checks to bounce. Additionally, sometimes people just forget to make deposits or check their account balance.
• Closed accounts: If the checking account was closed for any reason, checks will be rejected. In some cases, this is a sign of fraud, and it can also happen when payees are slow to deposit checks.
• Stop payment: If the check writer placed a stop payment on the check, the bank should honor that request. In those cases, payees need to find out why the request was made and make arrangements for an alternative form of payment.
• Issues with the check: If there’s anything suspicious, banks can refuse to honor the check. Some common problems include missing signatures and stale-dated checks, but other issues can cause banks to flag a check.

Fees Associated with Bounced Checks

When there are insufficient funds in an account, and a bank decides to bounce a check, it charges the account holder an NSF (non-sufficient funds) fee. If the bank accepts the check, but it makes the account negative, the bank charges an overdraft fee. If the account stays negative, the bank may charge an extended overdraft fee.

Different banks charge different fees for bounced checks and overdrafts, but the average overdraft fee is usually around $34. You’ll also likely have to pay a fee to whomever you wrote check to; they get dinged for depositing bad checks, and they’ll pass those charges on to you.

What Should You do if You Bounce a Check?

• Reach out: If you bounce a check, contact your bank and the person or company that received your check as soon as you’re aware of the mistake. You should explain your situation as a way of showing your good intentions.
• Pay up: If you pay up as soon as you can, a bounced check most likely isn’t going to appear on a credit report, so it probably won’t hurt your credit score. However, if you don’t pay up, it becomes an outstanding debt, and that can be reported by a bank, merchant or debt collection agency to the major credit reporting bureaus.
• Don’t bounce more checks: If you intentionally write checks knowing you don’t have enough money to cover them, you’re breaking the law. You could be charged with a misdemeanor or even a felony, depending on the amount and quantity of the unpaid transactions. To put it straight, don’t write a check if you don’t have enough money in your checking account.

Author’s Verdict

Knowing what a bounced check is, the fees associated with it, and what to do when it happens is very important so you can prevent it from happening. Furthermore, bounced checks are somewhat common and is something that you should be on the lookout for especially if you accept checks as a form of payment.

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