Bounced Check: What Happens if a Check Bounces?
Bounced checks are sometimes referred to as rubber checks because, instead of going through, they “bounce” back to the payer’s bank unpaid. No money is transferred, and the person who was expecting to be paid doesn’t receive their funds. The payer will typically get hit with fees and could also face other negative consequences. The recipient of a bounced check may also get hit with a fee.
Understanding what happens when a check bounces, who gets charged, and how to manage the situation can help you navigate this common financial issue.
Key Points
• When a check bounces, that means it can’t be processed or paid.
• Bounced checks can occur due to insufficient funds, errors in writing the check, closed accounts, stop payment orders, old checks, or fraud.
• Bounced checks can result in fees for both the check writer and the recipient.
• Bounced checks typically do not directly impact credit scores but can lead to missed and late payments (which may impact credit).
• There are steps you can take to address a bounced check, whether you wrote it or received it.
What Is a Bounced Check?
A bounced check, also known as a nonsufficient funds (NSF) check, is a check that cannot be processed typically because the payer’s checking account does not have enough funds to cover the payment. When a check is deposited, the recipient’s bank requests the funds from the payer’s bank. If the payer’s account lacks sufficient funds, the payer’s bank returns the check unpaid, causing it to bounce.
Here’s a look at some other reasons why a check might bounce.
• Account closure: If the account has been closed before the check is deposited, it will bounce.
• Incorrect information: Errors in writing the check, such as a mismatch between numbers and words for the check amount, can lead to a bounced check. That’s why it’s important to know how to properly fill out a check.
• Stale date: A check can bounce if it’s not cashed or deposited within six months of the date the check was written.
• Stop payment order: A stop payment order can be requested by the payer if they want to prevent it from being deposited. This might happen if they believe the check got lost or they no longer wish to pay for a service.
• Fraudulent activity: Checks written on accounts that do not belong to the payer, or those involved in fraudulent activity, will also bounce.
What Fees Come With Bounced Checks?
Both the payer and the payee can incur fees when a check bounces. Here’s a look at the fees that can result and who gets charged.
Nonsufficient funds (NSF) fee: If you write a check you don’t have sufficient funds to cover, your bank will typically charge an NSF fee. The average NSF fee is around $20.
Merchant fee: If the bounced check was written to a business, that business may also add on some charges. Many states allow merchants to charge customers up to $40 for the work of handling a bad check.
Overdraft fee: In some cases, a bank covers the check amount despite insufficient funds. This is known as an overdraft. The check won’t bounce, but you’ll likely get hit with an overdraft fee, which can run around $27.
Late payment fees: If the bounced check was intended for a bill payment, such as a credit card bill, you may also get hit with a late payment fee from the biller.
Returned check fee: If you’re on the receiving end of a bounced check, your bank may charge you a returned check fee for processing a bounced check. In addition, you might assume the check cleared and end up spending money you don’t actually have. This can result in overdrafting your own account and fees.
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What Happens if My Check Bounces?
You might accidentally end up bouncing a check if you write a check without looking into your account balance first, or if a check you wrote to someone doesn’t get cashed for a few months and you no longer have sufficient funds in your account to cover it.
When your check bounces, you will likely get hit with bank fees. But there are some other negative consequences that can follow as well. Here are some to keep in mind.
Outstanding Debt
When a check bounces, the payee doesn’t receive the promised funds. This means you still have an outstanding bill. For example, if your rent check bounces, the landlord doesn’t receive your payment. This means you have an outstanding debt to your landlord until you can pay the rent.
Potential Harm to Your Banking Reputation
Banks report consumer banking behavior to ChexSystems, an agency that collects and shares information about a person’s banking history with financial institutions. If you have a history of bounced checks (or other problems like unpaid fees and forced account closures), your ChexSystems report will reflect that. A blemished report could make it hard for you to open a new bank account in the future.
Risk of Account Closure
If you bounce enough checks, your bank could freeze or close your account. If you’re having trouble managing your checking account, it’s a good idea to reach out to a bank representative and explain your situation. The bank may be willing to work with you if they see you are actively trying to resolve the problem.
Recommended: 3 Reasons Why You Have a Frozen Bank Account
Legal Consequences
It’s illegal to knowingly write bad checks. If you write checks and you’re aware that you don’t have enough money to cover them, you could be charged with a misdemeanor or even a felony, depending on the amount and quantity of unpaid transactions.
What Should I Do if My Check Bounces?
If you discover that your check has bounced, it’s crucial to act quickly to mitigate the consequences. Here are key steps to follow.
1. Contact the payee. You’ll want to reach out to the payee as quickly as possible, explain the situation, and express your intention to resolve the issue. This can help maintain goodwill and prevent further actions.
2. Pay up quickly. Whether you add funds to your account and write a new check or find a different way to make the payment, making good on what you owe can help prevent the bounced check from turning into an outstanding debt. While a bounced check doesn’t get reported to the credit bureaus, if it leads to a missed or late payment, it could potentially impact your credit.
3. Request a fee waiver. It can be worthwhile to ask your bank if they can waive the NSF fee, especially if it’s your first offense or due to an unexpected situation.
4. Monitor your account. You’ll want to keep a close eye on your account balance and transactions to avoid future bounced checks.
What Should I Do if I Receive a Bounced Check?
If you receive a bounced check, you’ll want to contact the payer promptly. Inform them that the check has bounced and request immediate payment via an alternative method.
If the payer assures you that funds are now available, you can attempt to redeposit the check. If possible, you might opt 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.
If you’re having trouble getting a response from the check issuer, you might next want to send them a “bad check” demand letter. This is a formal request for payment that you send to the issuer by certified mail. It’s a good idea to include as many details as possible in the letter.
If the payer continues to be unresponsive or unwilling to pay, you may need to take legal action. Typically this involves suing the check issuer for the money owed in small claims court.
Preventing a Check From Bouncing
Preventing bounced checks involves careful financial management and awareness. These safeguards can help.
• Monitor your account. It’s important to regularly check your account balance and transactions to ensure you have sufficient funds. You can use your bank’s app or a budgeting app to keep track of exactly what’s going in and out of your account.
• Set up alerts. Many banks offer account alerts via text or email for low balances or large transactions. Utilizing these alerts can automate the process of checking your balance and can help you stay informed.
• Consider overdraft protection. This service can cover transactions when your account lacks sufficient funds, typically for a fee. Your bank might also allow you link your checking account to your savings account or line of credit at the same bank. When there’s not enough cash in your checking account to cover a transaction, money will automatically be transferred from the linked account. Before you use this option, though, you’ll want to check to see whether your bank charges a fee for the service.
• Maintain a buffer balance. Though you might prefer to keep most of your cash in a high-yield savings account to benefit from the interest, it’s a good idea to keep a financial buffer in your checking account to cover unexpected expenses and avoid overdrafts.
• Don’t accept payment by personal check. To avoid receiving a bad check, you may want to request payment by a cashier’s check, certified check, or money order, which come with more guarantees than a personal check.
Recommended: Avoiding Overdraft Fees: Top 10 Practical Tips
The Takeaway
Bounced checks can lead to expensive fees and even make it difficult to open new checking and savings accounts. However, you can avoid them with a little planning and attention to detail. Key measures include keeping a close eye on your account balance, setting up account alerts, and implementing safeguards like overdraft protection and linked accounts. If you’re in the market for a new checking account, you might also want to look for a bank that doesn’t charge overdraft fees.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Who gets charged for a bounced check?
Unfortunately, both the check writer and the recipient often have to pay a fee if a check bounces. The person who wrote the check may have to pay a nonsufficient funds (NSF) fee and potentially a merchant fee. The recipient of the bounced check may be charged a returned check fee.
Can you get in trouble for depositing a check that bounces?
Depositing a bounced check does not typically result in trouble for the depositor, but it can lead to inconvenience and fees. Your bank may charge a returned check fee for the failed deposit. If you repeatedly try to deposit known bad checks or are involved in fraudulent activities, however, you could face legal consequences.
How long does it take for a bad check to bounce?
The time it takes for a check to bounce can vary, but it generally takes a few days to a week. When a check is deposited, the payee’s bank will submit it to the payer’s bank for verification. If the payer’s bank identifies insufficient funds or other issues, the check will be returned unpaid. This process typically takes two to five business days, but it can take longer depending on the banks involved and the specific circumstances.
Do bounced checks affect my credit score?
Bounced checks do not directly impact your credit score, as they are not typically reported to credit bureaus. However, the consequences of a bounced check can indirectly affect your credit. If the bounced check leads to unpaid bills, collections, or legal action, these events can be reported to the consumer credit bureaus and negatively impact your credit.
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