A bad check is a check that cannot be paid since it’s written on a non-existent account or there are insufficient funds to cover the amount.
When someone writes a check, they are making a promise to the recipient that they can present the check at a bank or other financial institution and withdraw the amount of money stated on the check’s face. A bad check can’t fulfill that obligation.
It is typically illegal and considered fraud to knowingly write a bad check. Even if done unintentionally, though, it can harm your personal finances and banking relationships. Learn more about this facet of personal banking here.
Key Points
• A bad check is one that cannot be paid due to insufficient funds or its being drawn on a nonexistent account.
• Writing a bad check knowingly is illegal and considered fraud.
• Bad checks can lead to bank fees, other penalties, and legal consequences, in some cases.
• Check depositors may wish to verify checks and use the issuing bank for cashing them to prevent bounced checks and ensure they’re not fraudulent.
• Writing bad checks can harm banking relationships, trigger fees, and lead to an account being closed.
Defining a Bad Check
A bad check is one that is written against a nonexistent checking account or against one that does not have sufficient funds to make the check good.
Types of Bad Checks
There are two main types of bad checks:
• A bad check can reference a nonexistent bank or bank account. This may be due to such scenarios as checks printed with an incorrect bank routing number, an incorrect account number, or both. Or it might indicate that the account information was once valid, but now the account is closed. Or this could be an intentional act of bank fraud, with invented account information.
• A check may reference a valid account and routing number, but the bank account may not have enough money in the account to be processed (also known as making the check good).
How Banks Process Checks and Detect Bad Ones
When a bank processes a check, they may not make all of the funds available to the depositor immediately. Usually, a financial institution must make the first $225 available the next business day and often clears the rest on the following business day. But sometimes it can take longer for the rest to clear. This can be true especially when depositing a check to a new bank account or for a larger amount (specifically, more than $5,525). Instead, it may take a few business days or longer before the checks clear and the entirety of the check amount is available.
Banks take this time in order to make sure that the check will clear, meaning that there are sufficient funds in the account of the checkwriter.
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Reasons Why Checks Bounce
There are a few reasons why checks might bounce — here are a few of the most common:
Insufficient Funds in the Account
One of the most common reasons why a check might bounce is that there are insufficient funds in the checking account. You might have $1,000 in your account and think you have sufficient funds to write a check for $600. But if a $500 autopay posts to your account in the meantime, it will lower your available balance to $500, causing your $600 check to bounce when it is presented.
Errors in Check Writing
Another possible reason that a check might bounce is due to an error when writing the check. Knowing how to write a check may not be something many people (especially younger consumers) are familiar with. An error in the amount of a check can cause it to bounce due to incorrect information.
Typically, checks are preprinted with the account and routing details, but filling in the wrong amount or forgetting to sign a check (rendering it invalid) can cause problems.
Fraudulent Checks
Sometimes, bad checks occur in a premeditated way. There are criminals who intentionally write bad or fraudulent checks. They might write a check that they know will eventually bounce in order to access goods and services without actually paying for them.
Or they might have multiple bank accounts, and write a check to themselves, in the hopes of being able to cash it before the bank notices that it bounces. This kind of activity is often referred to as check kiting.
Bank Fees and Penalties
If you write a bad check and it is returned to your account for insufficient funds, your bank may assess a non-sufficient funds (NSF) fee to your account. These fees can be quite significant, up to around $35 per bad check. If this is the first time you have written a check that’s been returned and you’ve otherwise been a model bank customer, you may be able to contact your financial institution and request a one-time waiver of such a fee. In addition, if the check was, say, written to a merchant, they may charge you a returned check fee of $20 to $40 for the inconvenience.
Another possibility: The bank might cover the check for you (meaning they allow the check to clear, essentially loaning you funds so it doesn’t bounce) and charge you an overdraft fee.
Legal Implications and Potential Criminal Charges
It is unlikely that you will be criminally prosecuted for unintentionally writing a bad check. However, knowingly doing so is a crime, which might have legal implications. To avoid risking jail time or criminal or civil fines, do everything possible to avoid writing a bad check.
Impact on Your Banking Relationship and Credit Score
If your account balance is habitually low and you often find yourself unintentionally writing bad checks, your bank may terminate your checking or savings account.
Your bank may also report this information to consumer reporting services such as ChexSystems and/or Early Warning Services (EWS). These are similar to credit-reporting bureaus, but they keep tabs on banking behavior. Negative remarks on your banking history could mean you will have a difficult time accessing banking services in the future.
These agencies typically do not report to the credit bureaus so you should not see an impact on your credit score, however.
Worth noting: Depositing bad checks (vs.writing them) can also lead to consequences, such as a bank freezing or closing your account due to suspicious activity.
What to Do if You Write a Bad Check
If you unintentionally write a bad check, you’ll want to take some steps immediately or as soon as possible. If the check has not been cashed yet, contact the check recipient and request that they not try to deposit the check, and make alternate plans for them to receive their funds.
If, on the other hand, your check bounces without you realizing it, you may need to contact the recipient of the check after the fact to make amends.
Receiving a Bad Check: Steps and Precautions
There are a few things you can do if you receive a check that you suspect may bounce.
How to Verify a Check’s Validity
One thing that you can do when receiving a check is to verify the check. This can mean inspecting the check for any obvious irregularities. For instance, routing numbers are nine digits long. If a check has a longer or shorter one, the document could be fraudulent. There should be no signs of tampering with the signature or the amount on the face of the check. Most checks have the bank’s logo featured, and they may spell out security features on the back.
If the check is written against a bank that has physical branches near where you live, you can usually go into the branch and ask the teller if the account has sufficient funds to clear the check. That way, you’ll know that the check can clear before attempting to deposit or cash it. You may also be able to phone the issuing bank’s customer service for verification. (Tip: If a phone number for the bank is printed on the check, don’t use it. Instead, search online for the official phone number for the bank, just in case the check is fraudulent.)
Protecting Yourself From Check Fraud
As you read a check, one thing you can do to protect yourself from potential check fraud is to only cash a check at the bank that it is written against. The issuing bank would be able to see the available balance in the check writer’s account and know whether the check will bounce.
If you’re not able to cash the check at the issuing bank, another option is to contact the issuing bank’s customer service department, as noted above, to see if the check will clear. While banks will not typically give you the account balance of a customer, they may be able to tell you if a check will clear.
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The Takeaway
A bad check (sometimes also known as a hot check or a fraudulent check) is a check that is unable to be cashed or deposited. This might be due to incorrect information on the check or due to there being insufficient funds in the issuing account, which can make it bounce. If you write or receive bad checks, your bank may assess you fees and/or even close your account. If you regularly or intentionally write bad checks, you may also be subject to civil litigation and/or criminal prosecution.
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FAQ
Can I go to jail for writing a bad check?
Yes, intentionally writing a bad check is a crime, typically a misdemeanor, but in some cases, it can be a felony. Depending on the circumstances, it is possible to go to jail for writing a bad check. However, if you have never written a bad check before and/or it was not intentional, you are probably unlikely to go to jail for writing a bad check, although your bank may assess you a fee and/or close your account.
How long does a bad check stay on your record?
If your bank reports negative account information to ChexSystems and/or Early Warning Systems (EWS), writing a bad check can stay on your record for five years. This is another reason to do everything you can to avoid writing bad checks, even unintentionally.
What’s the difference between a bad check and a fraudulent check?
A bad check and a fraudulent check can refer to the same thing. Both can describe a check that is drawn on a nonexistent account or on one with insufficient funds to cover the check’s amount. However, a bad check could refer to one that’s unintentional while a fraudulent check could be written on purpose and therefore be considered criminal activity and have consequences. Another term for this type of check is a hot check.
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