What Is a Dishonored Check and What Are the Consequences?

Checks remain a common method for making and receiving payments. While generally reliable, situations can arise where a check cannot be successfully processed. Understanding what occurs when a payment fails to clear is important for anyone who uses checks regularly.

Understanding a Dishonored Check

A dishonored check refers to a check a bank refuses to pay or process when presented for payment. This means funds are not transferred from the check writer’s account to the recipient’s account. Common reasons include insufficient funds, meaning the account lacks the necessary balance to cover the check amount.

Other reasons a check might be dishonored include a stop payment order placed by the account holder. A closed or frozen account will also result in a dishonored check. Additionally, signature discrepancies or a “stale-dated” check (typically over six months old) can lead to its rejection by the financial institution.

Implications for the Check Writer

When a check is dishonored, the check writer typically faces direct financial penalties from their financial institution. The bank often charges a non-sufficient funds (NSF) fee, also known as a returned item fee, which can range from approximately $25 to $35 per occurrence. This fee is levied because the bank attempted to process the payment but could not complete the transaction.

Beyond their own bank’s charges, the check writer may also be responsible for fees incurred by the recipient’s bank. If the recipient’s bank charges a returned deposit fee, this amount may be passed back to the original check writer. Repeated dishonored checks can negatively impact the check writer’s banking relationship, potentially leading to account closure.

Implications for the Check Recipient

The recipient of a dishonored check will not receive the expected funds, leading to an immediate disruption in their financial planning. Their bank may also charge a returned item fee for the deposited check. These fees, similar to those charged to the writer, typically range from approximately $25 to $35.

The inconvenience extends beyond the financial aspect, as the recipient must then pursue alternative methods to secure payment. This can involve delays in accessing funds anticipated for bills or other expenses. Resolving the issue can consume time and effort, adding to the initial disruption.

Actions to Take

If you are the recipient of a dishonored check, the immediate step is to contact the check writer to inform them of the issue. Explain that the check was returned and discuss how they intend to provide alternative payment. Before re-depositing the check, ensure the check writer confirms they have added sufficient funds to their account.

For the check writer, upon learning a check has been dishonored, act quickly. Immediately add enough funds to your account to cover the original check amount and any associated fees your bank may charge. Promptly contact the recipient to apologize for the inconvenience and arrange for a new, valid payment method.