DEFINITION of 'Bad Check'

A check drawn on a nonexistent account or on an account with insufficient funds to honor the check when presented.

"Passing" bad checks is illegal, and the crime can range from a misdemeanor to a felony, depending on the amounts involved and whether the activity involved crossing state lines.

BREAKING DOWN 'Bad Check'

Many times, bad checks are written inadvertently by people who simply were unaware that their bank balances were too low. It is always a good idea to have a small overdraft line of credit to cover such situations, or keep a close eye on your balance near bill-paying time.

When there are insufficient funds in an account, the bank will "bounce the check" (refuse to honor it). Banks and vendors frequently charge fees for bounced checks, sometimes exceeding the amount for which the check was written. Online banking can help to avoid writing bad checks by allowing you to view your balance more frequently. Consumers can also create a backstop account that is automatically debited if the primary checking account is too low to pay a specific check.

RELATED TERMS
  1. Rubber Check

    Another name for a "bounced check." A rubber check is a slang ...
  2. Checking Account

    A transactional deposit account held at a financial institution ...
  3. Automatic Transfer Service - ATS

    A banking service offered to customers that has both a general ...
  4. Check Representment

    A system wherein a check that bounced or did not clear when it ...
  5. Availability

    Funds that have been deposited by third-party check into a customer's ...
  6. Check Hold

    Denotes a period of time equal to the maximum number of days ...
Related Articles
  1. Personal Finance

    What is a Bounced Check?

    Bounced check is a slang term to describe a check that cannot be processed because its writer has insufficient funds.
  2. Personal Finance

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  3. Personal Finance

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  4. Investing

    A Guide to Bank Accounts

    Find out which type of bank account suits your specific needs.
  5. Managing Wealth

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
  6. Managing Wealth

    2015's Top Checking Account Promotions

    Open a checking account in 2015 and the bank could give you a cash bonus. Check out these top offers.
  7. Personal Finance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  8. Financial Advisor

    Is A Premium Checking Account Worth It?

    Premium checking accounts give you free checking and other perks in return for keeping a certain balance in the bank. Is that the best use of your money?
  9. Tech

    New Bank Account? Don't Be Without These 6 Features

    Certain banking features can make managing your finances easier, so it's important to choose carefully when opening a new checking or savings account.
  10. Personal Finance

    Overdrafting

    An overdraft occurs when money is withdrawn from a bank account in an amount that exceeds the funds available in the account. Banks often permit this as a form of short-term loan to the account ...
RELATED FAQS
  1. How do you calculate payback period using Excel?

    Understand the various fees that can be assessed on a personal or business checking account, and learn methods to avoid being ... Read Answer >>
  2. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
  3. Can a checking account go negative?

    Find out about negative checking account balances and the ramifications. There is a price to pay, but smart consumers can ... Read Answer >>
  4. What US banks offer free checking accounts?

    Quit wasting money on monthly fees associated with your checking account and get a free checking account from reputable national ... Read Answer >>
  5. What are the differences between preference shares and bonds?

    Learn what information banks keep on file for their customers, and understand how this information can be used to deny an ... Read Answer >>
  6. Can a checking account affect your credit score?

    Find out if having a checking account can have a negative impact on your credit report. Generally, it doesn't, but there ... Read Answer >>
Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center