What is a Bounced Check: The Risks and How to Avoid Them?

For example, if you deposit a check, spend some of the funds, and the check later bounces, you may be on the hook to reimburse the bank and pay a fee. A bounced check is a check for which there aren’t enough funds in the bank customer’s account to cover it. The bank declines to honor the check and “bounces” it back to the account holder, who is typically charged a penalty fee for nonsufficient funds (NSF). As soon as you realize there’s a problem with your account balance, contact the payee to whom you wrote the checks. Ideally, you do this before anyone ever realizes that you wrote a bad check, but it’s still worth trying after the check hits your account.

How checks are verified

Because the check bounced, you never completed the payment, and you might end up missing (or being late on) a monthly payment. Late and skipped payments will certainly lower your credit scores. When you write a check, you tell your bank to pay a certain amount of money to someone else.

Build up your savings

Open a savings account or open a Certificate of Deposit (see interest rates) and start saving your money. Knowing how to properly fill out a check helps you avoid errors that can cause a check to bounce. The article was reviewed, fact-checked and edited by our editorial staff prior to publication. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.

Financial Lessons That Transformed My Finances

• Some banks offer lines of credit for overdraft coverage, which can be less costly than repeated fees.
• Meanwhile, returned check or chargeback fees may be charged to the person trying to cash or deposit the check by their bank.
• Avoid sending a bad check through account monitoring, either manually or by setting up account alerts so you’re notified when your balance is low.

Keep learning and stay on top of your finances, and you’ll be well on your way to a secure financial future. The information presented here is created by TIME Stamped and overseen by TIME editorial staff. You need to have a handle on what’s going out and what’s coming in to see if your budget and savings are on track. In this section, we’ll outline practical steps to take if you find yourself in the unfortunate circumstance of having a check bounce.

About Chase

As an extra tip, make sure to dispose of outdated checkbooks quickly so that they do not become mixed up with checkbooks for your current account. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.

• This way, a payment never goes forgotten and you can be sure that you always have enough cash on hand to cover transactions.
• Some banks and online financial institutions—among them, Chime and Quontic—don’t charge overdraft fees.
• If you bounced a check and are being contacted by a debt collector, make sure you’re being treated fairly.
• Because the check bounced, you never completed the payment, and you might end up missing (or being late on) a monthly payment.
• Make purchases with your debit card, and bank from almost anywhere by phone, tablet or computer and more than 15,000 ATMs and more than 4,700 branches.

If banks or lenders that we trust allow us to, we use a special link that informs them that the visitor on their site originated from us. If you end up signing up or applying for a quote, we will potentially get commission in return. In a criminal case, even higher fees might be in your future, along with a mark on your permanent record. Usually, the amount of the check determines whether it is prosecuted as a misdemeanor or a felony. Late payments will stay on your record for seven years, which can affect other loan eligibility and even insurance rates. Your top priority should be to get back on track with your original payment schedule.

Alternatives to personal checks

Understand the implications of a bounced check, including fees, bank actions, legal issues, and strategies for resolution. If your checking account doesn’t have enough money to check bounced meaning cover the full amount of the check, your bank won’t pay it. Both banks may charge fees, and the person who tried to cash the check may also get hit with a returned check fee.

Ask to Reverse or Reduce Fees

Sometimes this processing doesn’t occur until a few days after the check has been cashed. Banks often place holds on accounts after a bounced check to protect their interests. These holds restrict access to funds until deposits are cleared, with the duration depending on the bank’s policies and the account holder’s history.

No matter who you wrote the check to, it’s important to make good on the payment. Those databases are not part of your traditional credit scores—like FICO scores, which is the score commonly used for big loans like auto and home loans. Learn why checks bounce, how to handle it, and how to avoid it to manage your money better. Because there can be a bit of a lag, you may have thought that the payment was processed. After it’s rejected, though, any applicable funds will be pulled back from the merchant.