Bounced Check: Definition, What Happens Next, Fees & Penalties (2024)

What Is a Bounced Check?

A bounced check is slang for a check that cannot be processed because the account holder has non-sufficient funds (NSF) available for use. Banks return, or “bounce,” these checks, also known as rubber checks, rather than honor 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 of the check 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, it is not honored by the depositor’s bank and may result in overdraft fees and banking restrictions.
Additional penalties for bouncing checks may include negative credit score marks, refusal of merchants to accept your checks, and potentially legal trouble.
Banks often offer overdraft protection to prevent inadvertent check bouncing.

Understanding a 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 overdraft 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 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 2022, the average overdraft fee was $29.80. 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 requiring the writer to pay them a bounced-check fee.

How to Avoid Bounced Checks

Consumers can reduce the number of bounced checks they write by tracking their bank balances more carefully, by 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 by 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, debit cards, and immediate online payments such as mobile wallets, PayPal, or the like for discretionary spending.

How serious is a bounced check?

If you write a check for an amount that you had insufficient funds to cover, your bank will most likely charge you a non-sufficient funds (NSF) fee as well as potentially an overdraft fee. The business to which you wrote the bounced check may also levy a charge against you for the lack of payment. Other consequences of a bounced check include businesses refusing to accept your checks, a reduction of your credit score, and possibly even legal trouble.

How long does it take for a check to bounce?

Generally speaking, a check for an amount greater than $225 won’t clear until two or more business days after it’s deposited at a bank. In the same vein, it typically takes at least two business days for a bad check to bounce.

Will my bank notify me if a check bounces?

Banks aren’t required to notify an account holder when a check they signed bounces due to non-sufficient funds. However, some banks may offer options for customers to enroll in/sign up for in order to be notified of overdrafts.

The Bottom Line

From costly fees to hampering your ability to open new checking and savings accounts, bounced checks can have serious consequences. Fortunately, through preparation and diligence, they can be avoided. If you’re concerned about accidentally writing a bad check, consider signing up for overdraft protection through your bank and/or linking a savings account to your checking account.

Bounced Check Overview:

1. Definition:

A bounced check refers to a check that cannot be processed due to insufficient funds in the account of the check writer.
Banks return these checks, commonly known as rubber checks, resulting in Non-Sufficient Funds (NSF) fees for the account holder.

2. Legal Implications:

Passing bad checks can be illegal, ranging from a misdemeanor to a felony depending on the check amount and potential interstate activity.

3. Consequences:

Bounced checks lead to overdraft fees, banking restrictions, negative credit score marks, and potential legal repercussions.
Merchants may refuse to accept checks from individuals with a history of bounced checks.

4. Prevention Measures:

Overdraft protection and linking a line of credit to checking accounts are methods to avoid bouncing checks.
Consumers can use tools like TeleCheck to verify the validity of checks.

Bounced Check Fees:

1. NSF Fees:

When a bank bounces a check, it charges the account holder an NSF fee.

2. Overdraft Fees:

If the bank accepts the check but makes the account negative, overdraft fees are charged.
Extended overdraft fees may apply if the account remains negative.

3. Average Fees (As of 2022):

The average overdraft fee was $29.80, typically applied to drafts worth $24, including checks, electronic payments, and some debit card transactions.

After a Check Bounces:

1. Payee Charges:

The payee (e.g., a grocery store) may assess a bounced-check fee and reserve the right to redeposit the check.

2. Reporting to Bureaus:

Payees may report bounced checks to bureaus like ChexSystems, impacting the ability to open future accounts.

3. Business Actions:

Some businesses compile lists of customers with bounced checks, banning them from writing checks at their establishments.

Avoiding Bounced Checks:

1. Monitoring Balances:

Consumers can reduce bounced checks by tracking their bank balances meticulously.

2. Record-Keeping:

Maintaining a rigorous check register, recording every debit and deposit promptly, helps avoid overdrafts.

3. Alternative Payment Methods:

Using cash, debit cards, and online payment methods for discretionary spending minimizes the risk of bounced checks.

4. Overdraft Protection:

Funding a savings account and linking it to a checking account provides a buffer against overdrafts.

FAQs on Bounced Checks:

1. Clearance Time:

Checks above $225 may take two or more business days to clear, and bad checks typically bounce within two business days.

2. Bank Notifications:

Banks are not obligated to notify account holders of bounced checks, but some may offer notification options for overdrafts.

The Bottom Line:

Bounced checks can have severe consequences, from financial penalties to hindering future account openings. Through proactive measures such as overdraft protection and diligent financial management, individuals can mitigate the risks associated with bounced checks.

In conclusion, understanding the dynamics of bounced checks and adopting preventive measures is crucial for maintaining financial stability and avoiding the negative repercussions associated with this financial mishap.