What Is a Check Charge and How Can You Avoid It?
Understand bank fees related to checks and how to manage them effectively to protect your finances.
A check charge is a general term for various fees imposed by banks and financial institutions related to checks or activities within a checking account. These charges often arise from situations like insufficient funds, specific service requests, or certain account behaviors. Understanding these potential fees is important for managing personal finances effectively.
Understanding Check Charges
Banks implement check charges to cover administrative costs associated with processing transactions and managing accounts. These fees also serve to compensate for the risks involved, particularly when handling checks that lack sufficient funds to clear. Charges can act as a deterrent, discouraging account holders from engaging in practices that lead to financial instability or increased processing burdens for the bank.
When a check charge occurs, it typically appears on a bank statement, directly reducing the account balance. It is important to distinguish between an “actual balance,” which reflects all posted transactions, and an “available balance,” which represents the funds immediately accessible for new transactions. Checks are processed based on the available balance, and a discrepancy here can lead to unexpected charges.
Common Types of Check Charges
Non-Sufficient Funds (NSF) fees are imposed when a check or electronic payment is presented for an amount exceeding the available funds in an account, and the bank chooses to return the item unpaid. This means the transaction is declined, and the check “bounces.” NSF fees commonly range from about $17 to $34, though they can sometimes be as high as $50.
Overdraft fees occur when a check or transaction is presented, and although insufficient funds exist, the bank decides to pay the item, causing the account balance to go negative. This service, often viewed as a short-term loan, typically incurs a fee averaging between $27 and $35, but can range from $10 to $40. Some banks limit the number of overdraft fees charged per day.
A stop payment fee is charged when an account holder instructs their bank to prevent a check from being cashed or cleared. This action is usually taken if a check is lost, stolen, or issued in error. Stop payment fees generally range from $15 to $36, with an average often around $30 to $35.
Returned check fees for the recipient are charges imposed on individuals or businesses who deposit a check that subsequently bounces due to insufficient funds in the payer’s account. Even though the recipient is not at fault, their bank may charge them for processing the returned item. These fees typically average between $8 and $13, but can range from $10 to $19.
Banks also charge fees for specialized check services. Certified checks, which guarantee funds are available and set aside, typically cost between $10 and $20. Cashier’s checks, issued by the bank itself and drawn on the bank’s own funds, usually cost $10 to $15.
Check cashing fees for non-customers apply when someone attempts to cash a check at a bank where they do not hold an account, especially if the check is drawn on that bank. While some banks may offer this service, they often charge a fee, which can be around $7 to $10 or more. Retailers also offer check cashing services, with fees typically ranging from $4 to $8 for common checks.
Preventing Check Charges
Proactively managing a checking account helps avoid unexpected charges. Regularly monitoring the account balance is a fundamental step, allowing account holders to track incoming funds and outgoing payments. This practice helps ensure sufficient funds are always available before writing a check or making a payment.
Understanding the difference between an account’s “actual balance” and its “available balance” is also important. Utilizing bank-provided account alerts, such as low-balance notifications, can provide timely warnings before funds become critically low.
Linking a checking account to a savings account or a line of credit for overdraft protection can prevent transactions from being declined or incurring higher fees. This arrangement automatically transfers funds to cover shortfalls, though a smaller transfer fee may apply. Maintaining accurate records of all written checks and deposits helps reconcile the account and anticipate future balances.
Responding to Check Charges
If a check charge appears on a bank statement, the first step is to review the statement carefully to identify the specific charge and understand the transaction that triggered it. This review helps clarify the nature of the fee and confirms its legitimacy. Contacting the bank directly to discuss the charge is a prudent next action.
When speaking with the bank, inquire about their specific policies regarding the fee and the circumstances under which it was applied. Many banks have policies for waiving fees, especially for first-time occurrences or for long-standing customers with a good account history. Politely requesting a fee waiver can often resolve the issue, particularly if the charge was an anomaly.
Beyond addressing the immediate charge, it is beneficial to identify and address any underlying issues that led to the fee, such as budgeting practices or a lack of awareness of account balances. Taking steps to improve financial habits can prevent future check charges.