Bounced check: The consequences and how to prevent them (2024)

Nobody likes to bounce a check. The experience is right up there with undergoing a root canal or spending the afternoon at the department of motor vehicles, and bouncing a check can happen for many reasons.

Sometimes, a banking consumer writes a check without checking their bank account first, or a check may not clear before the needed funds are available (like a paycheck clearing a day or two after an individual pays the rent or phone bill.)

The key to avoiding a bounced check lies in understanding how the process unfolds and recognizing the fees and penalties it may trigger.

Let’s shine a light on the bounced check experience and what it can mean for everyday banking consumers.

What does it mean when a check bounces?

Bouncing a check means that a check you’ve written is not honored by your bank when presented for payment.

The term “bounce” stems from the bank or credit union that originally received the check returning that check, as the check writer (i.e., account holder) doesn’t have the funds to cover the check amount.

Once the check is kicked back to the paying bank or credit union, the account holder responsible for the bounced check may be liable for an overdraft or non-sufficient funds fee, at least, and possible criminal charges, at worst, if the bounced check meets a state’s definition of bank check fraud.

“Bouncing a check is not always synonymous with having insufficient funds, although insufficient funds are a common cause,” said Peter C. Earle, an economist at the American Institute for Economic Research. “A bounced check refers to any situation where a written check cannot be honored by the bank — for a number of different reasons.”

The process of check bouncing

When a check bounces, several steps are taken.

“First, the bank notifies the payee and charges a bounced check fee to the account holder. That in turn may lead to a negative account balance or additional overdraft fees if funds are insufficient,” said Earle.

The bank next returns the check to the payee, along with a reason for the return, and makes a digital record of the incident.

The account holder is then informed. “If not promptly resolved, additional consequences may include credit reporting, account closure and, depending upon the amount and circ*mstances, possibly legal action,” Earle notes.

Possible reasons for a bounced check

There are multiple ways a check can bounce, and financial consumers should get to know all of them to avoid a potential “rubber check” scenario. Here’s a snapshot.

• Insufficient funds: The most common reason for a bounced check is the check writer’s bank account doesn’t have enough cash to cover the check amount.
• The account is closed: Sometimes a fraudster may get a hold of a check from an account that’s closed and write a check knowing it will bounce.
• A “stop payment” situation: A banking consumer may write a check that, for various reasons after the fact, they want to “stop” from going through. Reasons for a stop payment include services not rendered by the check recipient, dissatisfaction with a merchant’s product or service, or suspicion of fraud.
• Check writing mishaps: A check may be returned because the recipient’s name was misspelled, the check had physical damage or there was a discrepancy between the numbered check amount and the “written out” check amount.
• For check fraud: If a bank check is stolen or forged, the check may well be returned by the recipient’s bank.

Implications of a bounced check

When a check bounces, it’s like a red flag for both the person who wrote the check and the one trying to cash it.

“The bank fees for a bounced check can vary, but they typically include charges from both the bank of the person who wrote the check and the bank of the person trying to cash it,” said Lamine Zarrad, CEO and founder of StellarFi, a credit score services firm in Austin, Texas. “These fees can add up, and it’s not just about the money. Bouncing a check can also harm your credit score and make future transactions more challenging.”

When a check bounces, there can be legal consequences, too.

“In many states, writing a check without sufficient funds can be considered a criminal offense, leading to fines or even legal action,” Zarrad adds. “As for bank policies, they usually charge fees for bounced checks, and these fees vary.”

Additionally, if bouncing checks becomes a recurring issue, banks might close the account or limit your checking privileges. “That makes it harder to manage your finances,” Zarrad adds. “It’s crucial to understand both the legal implications and your bank’s policies to avoid potential problems.”

How to handle a bounced check

If you bounce a check, contact your bank immediately to explain the situation and check for any fees. Then you’ll need to pay the owed amount as quickly as possible to avoid any further issues from an unpaid debt.

If you receive a check that bounces, contact the person who wrote it and let them know. You should also check with your bank for full details and to see if you will owe any fees.

To get the money back, your best bet is to work it out directly with the person who wrote the check.

“If it becomes a recurring problem or a significant amount, you might want to consider legal options,” Zarrad adds.

In that scenario, send a written demand for the owed amount, including any fees incurred due to the bounced check.

“Keep copies of all correspondence,” said Earle. “If the issuer continues to refuse payment, and the amount is within the small claims court limit of the competent jurisdiction, a small claims lawsuit may be filed.”

Effects of bounced checks on your credit

Bounced checks don’t directly impact credit ratings as they’re not typically reported to the major credit bureaus. There can be, however, an indirect impact of a bounced check on a credit report.

“Consumers may experience a peripheral change in their credit score due to any active debts or credit collections that stem from legal action taken by the creditor or lender,” said Earle. “In many cases, a bounced check may trigger active debts or collection calls and emails. Check writers should know these debts can be reported to credit agencies, which will likely lower credit scores and make it more difficult to land a loan, a decent credit card, or lower interest rates down the road.”

That’s a big reason why it’s imperative to address a bounced checks immediately.

Preventive measures to avoid check bouncing

To prevent checks from bouncing, it’s crucial to ensure enough money is available in the account before issuing a check.

“Regular monitoring of account balances and spending, along with diligent record-keeping and balancing of the checkbook, is essential,” said John Owens, executive vice president of Monterey Financial Services in Oceanside, California. “Take your time when writing a check to avoid errors and opt for banks that offer overdraft protection can also be effective strategies.”

Being thorough and defense-minded is the best antidote to a bounced check. Keep a close eye on your account balances and be sure to monitor pending transactions as well since they take more time to process. Set up low balance alerts if your financial institution offers them.