A bounced check is a check that is returned to its original bank because the money is not in the check writer’s account to process it. This can lead to a number of fees, and probably some headaches. One so-called rubber check could end up costing $65 or more. If there’s a risk you won’t have the funds to cover a transaction, you’re better off not writing a check for it.
In this guide we will talk about what exactly a bounced check is, the fees it may involve, and how to avoid them. If this sounds like something you are interested, continue reading this guide.
Editor’s Note: If you are wanting to learn how to cash a check without a checking account, be sure to read our guide to learn more.
What is a Bounced Check?
A bounced check is a check that was used for payment, but it could not be processed because the check writer did not 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.
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.
Bounced Check Fees
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 (OD) fee. If the account stays negative, the bank may charge an extended overdraft fee. The fee is usually around $35 per transaction.
After a check bounces once, your payee might try to re-deposit the check to see if you have funded your account. If not, expect to pay another round of fees.
What Happens When a Check Bounces?
When people pay by check, there is trust involved: No cash changes hands immediately, and it will take several days for the funds to move from one account to the other. The payee (or recipient of the check) doesn’t really know how much money the check writer has available for spending, but most customers don’t make a habit of bouncing checks, so checks are often accepted on faith.
In other words, merchants and service providers accept checks assuming the checks will clear without any problems.
- You can write anything: It’s possible to write a check for any amount you want, whether or not those funds are really available for spending in your checking account. Writing rubber checks intentionally is illegal, and a bad idea for numerous reasons, but it’s easy to do.
- Accidents happen: Sometimes checks bounce by accident. A check writer might believe they have funds available, but unexpected withdrawals reduce their balance and catch them by surprise. For example, automatic electronic payments, outstanding checks that hit an account unexpectedly, and large debit card holds can cause checks to bounce. Plus, 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.
- Issues with the check: Banks can refuse to honor a check if there’s anything suspicious. Common problems include missing signatures and stale-dated checks, but other issues can cause banks to flag a check.
How to Avoid Bounced Checks
Check writers need to ensure that they have sufficient funds available for every check they write. There are several steps they can take to prevent checks from bouncing.
- Know your balance: Check your available balance (which might be different from your account balance) often. Use personal finance apps and text messages with your bank to understand when money leaves your account.
- Keep a buffer: Leave extra money in your checking account for unexpected expenses. That money can help when you forget about payments that hit your account, and when you need cash for an emergency. If you constantly keep your account balance just above zero, you’re more likely to pay overdraft charges.
- Balance your account: Keep track of your account balance, deposits, and withdrawals. If you balance your accounts, you’ll know what’s going on in your account before your bank does. You’ll have time to make deposits or transfer funds to avoid bouncing checks and paying penalty fees.
- Communicate with payees: If you write a check and you later realize that it’s going to bounce, then contact the payee immediately. Let them know before they deposit the check, and make other arrangements. This will save time and money for both of you.
Author’s Verdict
Hopefully now through this guide you learned what a bounced check is and how to avoid the fees. If there’s a risk you won’t have the funds to cover a transaction, you’re better off not writing a check for it. Make sure to know your balance and to keep a buffer in your account.
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