What Is a Bounced Check?

A bounced check is slang for a check that cannot be processed because the account holder has nonsufficient funds (NSF) available for use. Banks return, or "bounce", these checks, also known as rubber checks, rather than honoring them, and banks charge the check writers NSF fees.

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

Key Takeaways

  • A bounced check occurs when the writer of the check has insufficient funds available to fulfill the payment amount on the check to the payee.
  • When a check bounces, they are not honored by the depositor's bank, and may result in fees and banking restrictions.
  • Additional penalties for bouncing checks may include negative credit score marks, refusal of merchants from accepting your checks, and potentially legally trouble.
  • Banks often offer overdraft protection to prevent inadvertent check bouncing.
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Bounced Check

Understanding Bounced Check

Many times, bad checks are written inadvertently by people who simply are unaware that their bank balances are too low. To avoid bouncing checks, some consumers use overdraft protection or attach a line of credit to their checking accounts.

A bounced check may result in fees, restrictions on writing additional checks, and negative impacts to your credit score. Writing too many bounced checks may also prevent you from paying merchants by check in the future. Many merchants use a verification system called TeleCheck to help them determine if a customer's check is good. If this system connects the check you’ve just presented for payment to a history of unpaid checks, the merchant will decline your check and ask you for a different form of payment.

Are There Fees for Bounced Checks?

When there are insufficient funds in an account, and a bank decides to bounce a check, it charges the account holder an NSF fee. If the bank accepts the check, but it makes the account negative, the bank charges an overdraft (OD) fee. If the account stays negative, the bank may charge an extended overdraft fee.

Different banks charge different fees for bounced checks and overdrafts, but as of 2016, the average overdraft fee was $34. Banks usually assess this fee on drafts worth $24, and these drafts include checks as well as electronic payments and some debit card transactions.

What Happens When a Check Bounces?

Bank fees are just one part of bouncing a check. In many cases, the payee also assesses a charge. For example, if someone writes a check to the grocery store and the check bounces, the grocery store may reserve the right to redeposit the check along with a bounced check fee.

In other cases, if a check bounces, the payee reports the issue to debit bureaus such as ChexSystems, which collects financial data on savings and checking accounts. Negative reports with organizations like ChexSystems can make it hard for consumers to open checking and savings accounts in the future. In some cases, businesses collect a list of customers who have bounced checks, and they ban them from writing checks at that facility again.

How to Avoid Bounced Checks

Consumers can reduce the number of bounced checks they write by tracking their balances more carefully, using an ironclad system of recording every single debit and deposit on a check register as soon as it occurs, or by keeping close tabs on their checking account using online banking.

Consumers can also fund a savings account and link it to their checking account to cover overdrafts. Alternatively, consumers may opt to write fewer checks or use cash for discretionary spending.