Bad checks, "rubber" checks and "hot" checks are always bad news. However, you can take some steps to nip the problem in the bud if you've written a check that can't be covered. Take a look at what you need to know for various circumstances involving bad checks to avoid the bigger repercussions that are possible.
What Does a Bad Check Mean?
A bad check is a check that's essentially not a real check because the funds cannot be extracted. This type of check is connected to an account that is either nonexistent or without the necessary funds. Even if you have some money in a legitimate bank account, a check will "bounce" if you don't have the full amount available to cover the total sum written on the check.
How Serious Is a Bad Check?
Yes, writing a bad check is illegal. Penalties vary by state based on how state laws classify the offense. If you intentionally write a bad check, you are looking at misdemeanor or felony charges in many cases.
The value of the check can sometimes impact the severity of the crime. You may also face civil penalties that will require legal expenses.
Can a Bad Check Ever Be an Accident?
Yes, most bad checks are actually caused by honest errors. However, you're still responsible for the error even if you didn't intend to write a bad check. Here's a look at the common reasons for bad checks:
- You didn't realize your account total had dipped so low because you've fallen behind with balancing your checkbook/bank account.
- While you had sufficient funds to cover the check when you wrote it, the recipient waited until you had spent more money to try to cash your check.
- You accidentally used an old checkbook connected to an account that no longer exists.
- Someone who shares your bank account forgot to tell you that they made a purchase using your debit card.
- You forgot to make a deposit that would have covered the amount on the check.
- Your employer is late with a deposit that would have covered the amount on the check.
- An incoming payment you were counting on to cover the amount was actually a bad check.
If you realize that a check may be about to bounce, you can try to get the money to cover it in your account quickly. Typically, doing a direct deposit at your local branch is the fastest way to get money to show up in your account. However, there's no guarantee that this "quick fix" will work if your check is cashed before the funds show up.
What Will the Bank Do for a Bad Check?
You can expect to be notified of a bounced check from your bank if you've written a bad check. Typically, you will be charged a fee for nonsufficient funds (NSF). It's possible that the fee will be higher than the actual amount of the check. In fact, you could owe anywhere from $10 to $60 in fees for being short just a few cents on a check.
However, all of that looks like nothing compared to the hassle of trying to restore your credit if the total owed on your bounced check goes to collections. That means you need to make good on the bounced check, pay all fees and keep your receipts to fix a bad check.
Read More: What Are the Dangers of Joint Checking Accounts?
Can You Fix a Bad Check?
If you realize your mistake before you hear from the bank, you may be able to reach out to the person you paid directly to let them know about the issue. The person or vendor may be willing to wait to deposit the check until you can fix the situation. If it's just a matter of not having the funds in your account, you may be able to convince them to hold off until you're able to add more money to your account. While awkward, this option can save you both from a headache.
Read More: How to Get Overdraft Fees Waived or Refunded
You can even work with the check recipient directly if it's too late to ask before the check bounces. Depending on your state, your check recipient may be able to deposit the check again one time to allow it to clear if you know that the funds are there. Make sure you're in good standing by asking your bank for step-by-step guidance for how to get your balance back above $0, get all fees covered and ensure that the check will clear.
What If You Receive a Bad Check?
If you received a bad check, first of all, try not to panic. A bad check may just be a mistake, and the easiest and most effective way to clear it up is by contacting the person or business who wrote you the check. Checks generally have the account holder's contact information on them, so you can call them, explain the situation and try and resolve the issue directly.
When trying to recoup the funds, make sure to demand any fees associated with trying to cash the bad check, if applicable. When asking for the money, you can also ask for other payment methods such as a money order or even cash. While every state and jurisdiction has different rules, if all else fails, you should get local authorities involved. By filing in small claims court, you can increase your chances of receiving your money, along with extra damages.
If the check was large, you may have to sue the check writer at the superior court level. The maximum amount you can file in a small claims court varies by state, but anything over $10,000 usually requires you to sue the bad check writer.
Final Thoughts: A Tip for Preventing Bad Checks
If you're concerned about writing checks that won't clear, you should consider adding overdraft protection to your account. This perk will add a small cushion that sets you back to $0 instead of going into the negative in the event that you write a check for a larger amount than what's in your account.
However, this feature won't protect you against writing "bad" checks for large amounts because it's just a very small, very temporary "courtesy" loan that protects you against penalties for a brief amount of time. It also shouldn't be thought of as a license to write checks you can't cover.
Read More: Overdraft Protection: Definition and How to Avoid It
- California Attorney General: Bad Checks
- Help With My Bank: Non-Sufficient Funds (NSF) Fees & Overdraft Protection
- National Credit Union Administration. "Understanding a Check and Balancing a Checkbook." Accessed Apr. 27, 2020.
- Consumer Financial Protection Bureau. "I Received a Check Where the Words and the Numbers for the Amount Are Different. Is This Check Valid and for How Much?" Accessed Apr. 28, 2020.
- Consumer Financial Protection Bureau. "Can a Bank or Credit Union Cash a Post-Dated Check Before the Date on the Check?" Accessed Apr. 29, 2020.
- Consumer Financial Protection Bureau. "Can I Cash a Check at Any Bank or Credit Union?" Accessed Apr. 29, 2020.
- If you catch the mistake right away, you might be able to avoid any fees. Deposit cash into your account immediately. If the check has not yet hit your account, you may get lucky and avoid a bounced check.
- Do not avoid the situation. Failure to make good on a bad check can hinder your ability to write checks in the future. Many merchants connect to a central system that alerts them to customers who have written bad checks.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.