Why Was My Deposited Check Returned?

When a deposited check is returned, it means the financial institution on which the check was drawn has declined to honor it. This means the funds you expected to receive are not available, and your bank will reverse any provisional credit previously applied to your account.

Common Reasons for a Returned Check

A frequent reason for a returned check is Non-Sufficient Funds (NSF), often referred to as a “bounced check.” This occurs when the check issuer’s account lacks the necessary balance to cover the amount written on the check. The funds might be insufficient because the issuer forgot about other pending transactions, miscalculated their balance, or an expected deposit did not arrive in time.

Another reason for a returned check is that the issuer’s account has been closed. Similarly, a stop payment order from the issuer can prevent a check from clearing. This instruction cancels a check or payment before it is processed, often due to disputes, lost checks, or potential fraud.

Issues with the check itself, such as a missing or invalid signature, can also lead to a return. Banks verify signatures against their records, and if there is no signature or it does not match, the check may be rejected. A post-dated check, written with a future date, or a stale-dated check, typically one older than six months, might also be returned by the bank. Financial institutions have policies regarding the validity period of checks, and those outside this timeframe may not be honored.

Clerical errors on the check, such as an incorrect payee name or a mismatch between the written and numerical amounts, can cause a return. The bank’s processing systems require consistency in these details. In more serious instances, a check identified as altered or forged will be returned. Banks have fraud detection measures to identify counterfeit or tampered checks, leading to their rejection.

While less common, a bank error can occasionally be the cause of a returned check. This might involve a technical glitch during processing or an oversight by bank personnel. In such cases, the error is typically identified and rectified by the bank once brought to their attention.

Immediate Consequences of a Returned Check

When a deposited check is returned, your bank will likely charge a “returned deposited item fee.” These fees are imposed because your bank incurred costs attempting to process a check that ultimately could not be paid. The fees can vary, often ranging from $10 to $19 per returned item, though some banks might charge more. This fee is distinct from any non-sufficient funds (NSF) fee the check writer’s bank might impose on them.

The provisional credit you initially received when you deposited the check will be reversed from your account. If you have already spent these funds, your account balance could become negative. This can lead to further issues, such as overdraft fees if other transactions subsequently attempt to clear from the now-depleted account.

Frequent instances of returned deposited items, even if not due to your fault, can affect your bank relationship. Banks monitor account activity for risk assessment. While returned deposited items generally do not impact your credit score, a pattern of such occurrences could lead to your bank placing longer holds on future deposits or, in rare cases, reconsidering your banking relationship.

Steps to Take When a Check is Returned

Upon notification that a deposited check has been returned, your first step should be to contact your bank. They can provide the specific reason for the return and explain any associated fees charged to your account. Understanding the precise reason, whether it is non-sufficient funds, a closed account, or a stop payment, is essential for determining your next course of action.

Promptly contact the person or entity who wrote the check. Explain that the check was returned and inquire about the reason. This communication is crucial for understanding the underlying issue and making arrangements for an alternative payment.

Simply re-depositing the returned check without addressing the root cause is generally not advisable. If the check was returned due to a closed account or a stop payment order, re-depositing it will not resolve the issue and will likely result in additional fees for both you and the issuer. Re-depositing may only be viable if the issue was temporary insufficient funds and the issuer confirms they have since added money to their account.

Instead, arrange for an alternative method of payment from the check issuer. Options such as a wire transfer, direct deposit, cashier’s check, or cash provide more certainty of funds availability. These methods bypass common check-related issues and offer a more secure transaction.

Throughout this process, maintain thorough documentation of all communications and transactions related to the returned check. Keep records of when you were notified, the reason for the return, any fees incurred, and details of your conversations with the check issuer and your bank. This documentation can be valuable if any disputes arise or if you need to pursue further action.

Preventing Future Returned Checks

To minimize the chances of a deposited check being returned, carefully verify the check details before depositing it. Confirm the date, ensure the payee name is correct, and check for a clear signature. Inspecting the check for any signs of alteration, smudges, or inconsistencies can help identify potential issues.

For larger amounts or checks from unfamiliar sources, consider confirming funds availability with the issuer if appropriate. While banks cannot disclose account balances, they may be able to confirm if a specific check amount would be covered upon presentation.

For important payments, consider alternative payment methods that offer greater certainty than personal checks. Electronic transfers like Automated Clearing House (ACH) or wire transfers, digital wallets, or certified funds such as cashier’s checks or money orders can reduce the risk of a returned item. These methods typically provide faster and more secure transactions.

Be aware that banks may place holds on deposited checks, meaning the funds might not be immediately available for withdrawal. This holding period allows the bank to verify the check and ensure it clears. Understanding your bank’s funds availability policy can help you plan your finances accordingly and avoid inadvertently drawing against funds that are not yet cleared.