Bad Check

AAA

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.

INVESTOPEDIA EXPLAINS '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. Transit Item

    Any check or draft that is issued by an institution other than ...
  2. Transposition Error

    A simple error of data entry. Transposition errors occur when ...
  3. Exception Item

    A banking term used to describe a check that cannot be processed. ...
  4. Rubber Check

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

    A transactional deposit account held at a financial institution ...
  6. Commercial Bank

    A financial institution that provides services, such as accepting ...
Related Articles
  1. Should You Pay In Cash?
    Budgeting

    Should You Pay In Cash?

  2. The Ins And Outs Of Bank Fees
    Options & Futures

    The Ins And Outs Of Bank Fees

  3. Your First Checking Account
    Insurance

    Your First Checking Account

  4. Choose To Beat The Bank
    Options & Futures

    Choose To Beat The Bank

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center