Bad Check


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.


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.

  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. Commercial Bank

    A financial institution that provides services, such as accepting ...
  5. Overdraft

    An extension of credit from a lending institution when an account ...
  6. Bounced Check

    A slang word for a check that cannot be processed because the ...
Related Articles
  1. Budgeting

    Should You Pay In Cash?

    Avoiding all forms of plastic payment can do wonders for your stress level and pocket book.
  2. Options & Futures

    The Ins And Outs Of Bank Fees

    These service charges could nickel and dime you right out of your nest egg.
  3. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  4. Options & Futures

    Choose To Beat The Bank

    From internet banking to credit unions, it's in your power to cut fees and maximize service.
  5. Budgeting

    When Good People Write Bad Checks

    Overdraft protection can help when you overestimate your balance, but it will cost you.
  6. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  7. Stock Analysis

    JP Morgan Chase & Co. Vs. Bank of America Stock

    Examine two of the big four U.S. money center banks, Bank of America Corporation and JPMorgan Chase & Company, by comparing important equity evaluation metrics.
  8. Savings

    Is It Safe to Send Money Through Facebook?

    Learn how Facebook employs strong measures to keep your information safe when sending money, but understand the rare threats that still exist.
  9. Investing

    How Shackling Offshore Banks Will Impact You

    FATCA regulations have cast a wide net on offshore banking activities, and many innocent account holders might get caught in its tangle.
  10. Economics

    What is a Loan Loss Provision?

    Banks set aside loan loss provisions to cover losses from bad loans.
  1. How does your checking account affect your credit score?

    Your credit report provides a snapshot for prospective lenders, landlords and employers of how you handle credit. For any ... Read Full Answer >>
  2. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  3. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  4. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  5. What net interest margin is typical for a bank?

    In the United States, the average net interest margin for banks was 3.03% in the first quarter of 2015. However, this was ... Read Full Answer >>
  6. What are the main benchmarks that track the banking sector?

    The appropriate benchmarks for tracking banking sector performance depend on the type of banking. For instance, commercial-only ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!