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. Bounced Check

    A slang word for a check that cannot be processed because the ...
  2. Rubber Check

    Another name for a "bounced check." A rubber check is a slang ...
  3. Check

    A written, dated and signed instrument that contains an unconditional ...
  4. Certified Check

    A type of check where the issuing bank guarantees the recipient ...
  5. Float Time

    The amount of time between when an individual writes and submits ...
  6. Automatic Transfer Service - ATS

    A banking service offered to customers that has both a general ...
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. 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?
  4. Investing

    The Best Small Business Checking Accounts in 2016

    Accounts with big banks offer frills, such as mobile and text-based banking – but for small businesses, local banks and credit unions can save money.
  5. 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?
  6. Investing

    What is a Cashier’s Check?

    A cashier’s check is a check written on a financial institution’s funds.
  7. Personal Finance

    10 Checking Accounts the Ultra Rich Use

    These accounts – created specifically for the wealthy – come with special extras such as personal bankers, waived fees and the option of placing trades.
  8. Personal Finance

    Check Your Checking-Account History

    Something you never thought you’d have to worry about: whether a bank will grant you a checking account. If you’ve had too many overdrafts, it might not.
  9. Personal Finance

    Best Checking Accounts For Couples

    Being a couple, especially if you both have jobs, can help you qualify for benefits and fee waivers that would be tougher to get on just one salary.
  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 long does it take a check to clear?

    It usually takes two days for a check to clear, but in some cases it may take longer. Discover how banks treat large deposits ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What Are the Pros and Cons of Online Checking Accounts?

    Learn about the ways an online checking account can save you time and money, but understand the drawbacks before signing ... Read Answer >>
Hot Definitions
  1. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  2. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  3. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  4. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  5. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  6. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
Trading Center