What is a bounced check?
Quick insights
- A check can “bounce” when it can’t be processed due to insufficient funds in the checking account it’s connected to, mismatching information or other account-specific issues.
- Bouncing a check can negatively impact the reputation of the check writer, and it’s important to take steps to resolve the problem quickly to avoid derogatory marks and bounced check fees.
- Monitoring your balance and double-checking the details of your check are steps you can take to avoid bouncing checks.
While checks have fallen out of favor in recent years as a dominant form of payment, there are still occasions when a digital or hand-written check is preferred. Before writing a check, it’s important to know how they work to avoid issues such as check rejection. In common terms, a rejected check is often referred to as a “bounced check” or a “rubber check.” In this article, we’ll describe why certain checks bounce, what the consequences are and how to prevent it.
How checks are verified
A check will be rejected, or “bounce,” when its details cannot be verified by the check writer’s bank. After a check has been written and presented as payment, the payee will attempt to cash it with their bank. The payee’s bank will then work with the payer’s bank to verify the information on the check. When the details are confirmed, the funds will be transferred between banks and paid out. But when there is a discrepancy, the check will bounce, and the payee is left empty-handed.
What causes checks to bounce?
Most frequently, bounced checks are the result of insufficient funds in the check writer’s bank account. Sometimes this is due to a simple timing issue, such as a pending deposit still processing at the time a check is presented for payment. In other instances, the check writer is writing the check in good faith but has lost track of their account balance.
Banks verify the information on checks both for business purposes and to detect and prevent fraud. Beyond balance issues, a bank may reject a check during the verification process due to:
- Account closure or freeze: The account number on the check needs to match a valid, current account.
- Errors or mismatches: Incorrect information (such as payee name), mismatched signatures or an incorrect date.
- Stop payment order: A customer may have contacted their bank to stop a check, causing the bank to not honor it when presented.
- Account restrictions: Some bank accounts may limit the number of checks that can be written from a certain account.
What happens if you bounce a check?
There are a range of potential consequences for a bounced check. Those who unintentionally write bounced checks could face repercussions that include bank fees, reputational damage and civil penalties. Depending on the circumstances, those who knowingly write a bad check may also face criminal or misdemeanor charges.
Bank fees from a bounced check
The bank fees for a bounced check can vary, with some institutions charging as little as $30 and others as much as $50. In the case of insufficient funds, some bank accounts will pay out the amount when the check is cashed but overdraw the account. Overdrafts can typically be resolved by adding the missing funds and covering associated fees.
Potential impact to your credit score
While banks do not specifically report bounced checks to credit bureaus, your credit score can still be impacted if the bounce causes you to miss a payment. Late and missed payments may be reported to the credit bureaus and affect your credit score. In a situation where a check you write bounces but you’re able to pay the bill through an alternative method, your score is likely to be unaffected.
Reputational risks of bouncing checks
Bouncing a check can be an embarrassing and trust-testing issue, especially if it occurs between individuals with a personal or professional relationship. Those who frequently write checks that bounce can also be identified by retailers, banking institutions and other creditors as a high-risk customer. Certain agencies keep records on those who have bounced checks in the past, with repeated marks gradually diminishing a person’s access to certain financial services.
Legal consequences from a bounced check
A person who writes a check knowing that it will bounce is committing a type of payment fraud. The punishment for this offense varies by state and heavily relies on the details of the crime, including the amount the check was for. Those with repeated offenses are likely to face more serious charges than those who are first-time offenders.
What to do if you’ve accidentally bounced a check
If you've accidentally bounced a check, working quickly to correct the situation can help you avoid derogatory marks, serious consequences or civil penalities.
- Start by reaching out to the payee to express your intention to resolve the issue and make the missing payment as soon as possible.
- Next, consider contacting your bank. If this is your first bounced check, or your check bounced for unforeseen circumstances, your bank may be willing to waive associated fees.
- Finally, be vigilant in monitoring your account balance and transactions to prevent writing bounced checks in the future.
Preventing bounced checks
Monitoring your account balance and transactions is one of the best ways to avoid writing a check that will ultimately bounce. Still, even with a close eye on your finances, it’s possible to lose track. To further reduce your chances of bouncing a check, you can:
- Set up account alerts: Some banks allow you to set up alerts (such as by email or text message) to notify you when your account balance is low.
- Enable overdraft protection: You can choose to link to another bank account (in particular, a savings account) for automatic transfers in the event your checking account falls short. Depending on the institution and account details, this may be a free service.
- Maintain a buffer: If your budget allows it, try to keep a minimum balance of a few hundred dollars in your checking account for unexpected bills and transfers.
- Proof-read your checks: Before handing a check off as payment, double-check that you have written the correct date, payee information and amount.
As an extra tip, make sure to dispose of outdated checkbooks quickly so that they do not become mixed up with checkbooks for your current account.
Alternatives to personal checks
Today’s consumers have many options when it comes to making payments. In fact, many merchants have retired checks altogether as an accepted form of payment, with a preference for debit, credit or cash. Assuming that the payment amount is available, spending with a debit or credit card will immediately transfer funds to the merchant.
For special occasions where a check is still preferred, consider getting a cashier’s check from your bank or credit union. These types of checks require payment up-front, meaning that the total is guaranteed to be available when the payee moves to cash it.
In conclusion
Anyone planning to issue a personal check should be aware of the risks and how checks bounce. At best, bouncing a check can be an awkward situation to recover from, with the potential for certain fees and derogatory marks. Setting up fail-safes like balance alerts and overdraft protection can offer added assurance against bouncing a check. With reasonable attention to detail, it’s possible to use personal checks safely and with minimal risk of bouncing.
