What Is a Bounced Check?
A bounced check is slang for a check that cannot be processed because the account holder has non-sufficient funds (NSF) available for use. Banks return, or “bounce,” these checks, also known as rubber checks, rather than honor them, and banks charge the check writers NSF fees.
Passing bad checks can be illegal, and the crime can range from a misdemeanor to a felony, depending on the amount of the check and whether the activity involved crossing state lines.
Key Takeaways
- A bounced check occurs when the writer of the check has insufficient funds available to fulfill the payment amount on the check to the payee.
- When a check bounces, it is not honored by the depositor’s bank and may result in overdraft fees and banking restrictions.
- Additional penalties for bouncing checks may include negative credit score marks, refusal of merchants to accept your checks, and potentially legal trouble.
- Banks often offer overdraft protection to prevent inadvertent check bouncing.
Understanding a Bounced Check
Many times, bad checks are written inadvertently by people who simply are unaware that their bank balances are too low. To avoid bouncing checks, some consumers use overdraft protection or attach a line of credit to their checking accounts.
A bounced check may result in overdraft fees, restrictions on writing additional checks, and negative impacts to your credit score. Writing too many bounced checks may also prevent you from paying merchants by check in the future. Many merchants use a verification system called TeleCheck to help them determine if a customer’s check is good. If this system connects the check you’ve just presented for payment to a history of unpaid checks, the merchant will decline your check and ask you for a different form of payment.
Are There Fees for 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 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 as of 2022, the average overdraft fee was $29.80. Banks usually assess this fee on drafts worth $24, and these drafts include checks as well as electronic payments and some debit card transactions.
What Happens When a Check Bounces?
Bank fees are just one part of bouncing a check. In many cases, the payee also assesses a charge. For example, if someone writes a check to the grocery store and the check bounces, the grocery store may reserve the right to redeposit the check along with requiring the writer to pay them a bounced-check fee.
In other cases, if a check bounces, the payee reports the issue to debit bureaus such as ChexSystems, which collects financial data on savings and checking accounts. Negative reports with organizations like ChexSystems can make it hard for consumers to open checking and savings accounts in the future. In some cases, businesses collect a list of customers who have bounced checks and ban them from writing checks at that facility again.
How to Avoid Bounced Checks
Consumers can reduce the number of bounced checks they write by tracking their bank balances more carefully, by using an ironclad system of recording every single debit and deposit on a check register as soon as it occurs, or by keeping close tabs on their checking account by using online banking.
Consumers can also fund a savings account and link it to their checking account to cover overdrafts. Alternatively, consumers may opt to write fewer checks or use cash, debit cards, and immediate online payments such as mobile wallets, PayPal, or the like for discretionary spending.
How serious is a bounced check?
If you write a check for an amount that you had insufficient funds to cover, your bank will most likely charge you a non-sufficient funds (NSF) fee as well as potentially an overdraft fee. The business to which you wrote the bounced check may also levy a charge against you for the lack of payment. Other consequences of a bounced check include businesses refusing to accept your checks, a reduction of your credit score, and possibly even legal trouble.
How long does it take for a check to bounce?
Generally speaking, a check for an amount greater than $225 won’t clear until two or more business days after it’s deposited at a bank. In the same vein, it typically takes at least two business days for a bad check to bounce.
Will my bank notify me if a check bounces?
Banks aren’t required to notify an account holder when a check they signed bounces due to non-sufficient funds. However, some banks may offer options for customers to enroll in/sign up for in order to be notified of overdrafts.
The Bottom Line
From costly fees to hampering your ability to open new checking and savings accounts, bounced checks can have serious consequences. Fortunately, through preparation and diligence, they can be avoided. If you’re concerned about accidentally writing a bad check, consider signing up for overdraft protection through your bank and/or linking a savings account to your checking account.
