The origins of the term “bounced check” date back to 1920, when American writer Damon Runyon stated that “a bad check is called a rubber check because it bounces back when it hits the bank.” More formally, a bounced check is one that a bank or similar financial institution refuses to pay, instead returning it to the writer. You need to respond when you bounce a check or when someone passes off a rubber check on you.
Understand Why Checks Bounce
Understanding why checks bounce is essential to avoid writing them and harming your personal finances. The reasons why checks bounce vary:
- Insufficient funds.Your bank account has an available balance representing the funds you can immediately use. If you write checks that would cause your available checking account balance to fall below zero, the bank will return the checks unpaid due to nonsufficient funds (NSF). You can avoid the nonsufficient funds fee by arranging overdraft protection in which other accounts (credit cards and a savings account) automatically transfer enough money to cover the amount of the check.
- Signature problems. If you write a check in a hurry, you might forget to sign it. Or you may be so rushed that you sign your name illegibly. In either case, the bank may refuse to honor your check.
- Defective check. You can mess up a check with incorrect or missing information. For example, you might spell out an amount different from the dollar figure you enter. If you catch a mistake, tear up the check and write a new one.
- Bad date. Perhaps you gave someone a check that wasn’t immediately cashed. After six months, the check is stale-dated, and banks may refuse to honor it. Another problem can arise when you post-date a check and the payee cashes it early. Premature cashing could land you in NSF territory.
Bank problems beyond your control could also cause your check to bounce. In that case, you should be able to avoid any fees.
Bounced Checks Trigger Fines and Penalties
Banks charge an NSF fee for a returned check. If they do you the courtesy of paying the check, they will charge you an overdraft check fee instead of a returned check fee. Depending on the bank or credit union, these charges can range from $25 to $35 or more, though the Consumer Financial Protection Bureau says they're $34 on average. Merchants can also charge a bounced check fee, typically $20 to $40, if they deposit a bad check.
Beyond monetary penalties, you may cause your bank to report the incident to ChexSystems®, Telecheck or a similar consumer reporting agency that tracks banking problems. Items remain on file for five years and could cause a future bank to refuse you a new account.
Respond When You Bounce a Check
If you bounce a check, immediately contact the bank and the check recipient to explain what happened. Then quickly pay the money you owe, including any assessed fees. Ask the bank not to report the incident to the bank reporting agencies. If you don’t have overdraft protection, consider obtaining it to prevent future checks from bouncing.
Seek Recourse When You Receive a Bad Check
If the check bounced for innocent reasons, the check issuer would likely attempt to get you your money as soon as possible. Contact the writer to work out the problem. You may be able to redeposit the returned check once the payer deposits enough funds in the overdrawn account. Unfortunately, the bank may charge you overdraft fees even if you weren’t at fault.
If you were a victim of fraud, you might have to seek out a collection agency or file a lawsuit to get a satisfactory response. Both contingencies are costly, so the bad check must be sufficiently large to warrant your action. The Federal Deposit Insurance Corporation advises that you can also contact state and federal authorities to report the incident if you suspect a crime
- Consider overdraft protection. This is a separate account that covers your primary checking account if it goes into the negative, preventing you from bouncing a check.
- Never wait. Try to clear up bad checks within a month. If you wait longer, they go on a national record-keeping system such as TeleCheck or Check Systems, preventing you from opening another checking account.
Eric Bank is a senior business, finance and real estate writer, freelancing since 2002. He has written thousands of articles about business, finance, insurance, real estate, investing, annuities, taxes, credit repair, accounting and student loans. Eric writes articles, blogs and SEO-friendly website content for dozens of clients worldwide, including get.com, badcredit.org and valuepenguin.com. Eric holds two Master's Degrees -- in Business Administration and in Finance. His website is ericbank.com.