DEFINITION of 'Bad Check'

A bad check is a check drawn on a nonexistent account or on an account with insufficient funds to honor the check when presented. "Passing" a bad check is illegal, and the crime can range from a misdemeanor to a felony, depending on the amount involved and in which state it occurred.

BREAKING DOWN 'Bad Check'

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. Often, bad checks are written inadvertently by people who simply were unaware that their bank balances were too low. Online banking can help to avoid writing bad checks by allowing account holders to view their balance more frequently. Consumers can also create an overdraft account that is automatically debited if the primary checking account is too low to pay a specific check.

Bad Checks and the Law

The treatment of someone who tenders a check knowing that there are insufficient funds can vary by state. In some states there also must be an intent to defraud. In the majority of states the crime is considered a misdemeanor; if the check amount exceeds certain thresholds, the crime can be treated as a felony. Civil penalties apply in all cases, with a common penalty amount equivalent to the face value of the check, a multiple of the check amount with a cap, or the check amount plus court and attorney fees. Generally, a crime is not committed if a post-dated check is presented because the check is a promise to pay in the future. Whether there are insufficient funds at the time is irrelevant.

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