What If a Check Bounces? Here’s What Happens Next

A bounced check, also known as a dishonored check or non-sufficient funds (NSF) check, occurs when a bank cannot process a check because the account from which it was drawn lacks sufficient funds to cover the payment. This situation can create immediate financial complications for both the check writer and the recipient.

Understanding a Bounced Check

The most frequent reason for a check to bounce is insufficient funds, meaning the account holder does not have enough money in their checking account to cover the check’s amount. Other reasons include a closed account, a stop payment order placed by the account holder, or errors in writing the check such as an incorrect date or illegible handwriting.

When a check is deposited, the recipient’s bank attempts to collect the funds from the check writer’s bank. If the check writer’s account lacks the necessary funds, their bank will reject the payment and return the check to the recipient’s bank, marking it as “Non-Sufficient Funds” (NSF). Both the check writer and the recipient are typically notified by their respective banks, often through bank statements or direct notifications.

The immediate financial consequence for the check writer is a non-sufficient funds (NSF) fee imposed by their bank. These fees range from $27 to $40 per incident. If multiple checks are presented and returned, these fees can accumulate quickly, as some banks may charge a fee for each returned item. The check recipient may also incur a “returned item fee” from their bank, which is a charge for processing the unpayable check. These fees are also in the range of $27 to $40.

What to Do as the Check Writer

If you have written a check that has bounced, immediate action is necessary to rectify the situation and minimize further complications. The first step is to contact the check recipient promptly to inform them of the issue and apologize for the inconvenience. Clear communication helps maintain trust and allows both parties to work towards a resolution.

Next, it is important to deposit sufficient funds into your checking account to cover the original check amount, along with any non-sufficient funds (NSF) fees your bank has charged. You should also verify if the recipient incurred any returned item fees from their bank and be prepared to reimburse them for these charges. Many banks allow customers to view their account activity and fees online or through mobile banking applications, which can help in determining the exact amount needed.

To prevent future bounced checks, regularly monitor your account balance. This includes tracking all deposits and withdrawals, as well as being aware of pending transactions or automatic bill payments that may not yet be reflected in your available balance. Many financial institutions offer services such as low-balance alerts via email or text message, which can provide timely warnings if your account balance falls below a specified threshold. Additionally, considering overdraft protection links your checking account to another account, such as a savings account or a line of credit, to automatically cover transactions that would otherwise overdraw your account. While overdraft protection can prevent a check from bouncing, it often involves associated fees.

What to Do as the Check Recipient

If you have received a bounced check, contact the check writer as soon as possible to inform them that the check was returned unpaid. During this communication, you should request an alternative form of payment, such as a cashier’s check, money order, or an electronic transfer.

Your bank may charge you a returned item fee for processing the bounced check. It is important to understand what this fee is and how much it costs, as it will reduce the amount of funds you believed you had. These fees typically range from $27 to $40 per item. Some banks may attempt to re-deposit the check automatically, often once or twice, if the reason for the bounce was insufficient funds. However, if the check bounced for other reasons, such as a closed account or a stop payment, re-depositing it may not be effective and could lead to additional fees.

If the check writer is unresponsive or unwilling to provide alternative payment after reasonable attempts, you may need to consider further actions. Sending a formal demand letter, often referred to as a bad check notice, can prompt the check writer to resolve the issue. For smaller amounts, pursuing the matter in small claims court could be an option. Keep detailed records of all communications and transactions related to the bounced check.

Potential Further Consequences

Beyond the immediate financial implications, repeated instances of bounced checks can negatively impact an individual’s banking relationship. Financial institutions may view frequent bounced checks as a sign of poor financial management, which could lead to actions such as closing the checking account. This can make it difficult to open new bank accounts in the future.

Banks often report account mismanagement, including frequent bounced checks, to consumer reporting agencies like ChexSystems. A negative report in ChexSystems can hinder an individual’s ability to open new deposit accounts at other banks and credit unions for several years.

If the debt from the bounced check is not settled, the check recipient may pursue civil legal action to recover the funds. While not a criminal matter in most cases unless there was intent to defraud, such civil actions can result in additional financial burdens for the check writer if a judgment is awarded against them.