It’s a terrible feeling to open a bank notification, whether by text, email, or snail mail, only to find out you’ve bounced a check or received a bad check. Your heart races, your palms sweat, and all you want to do at that moment is to fix it. So, where do you start? Keep reading to learn how to handle a bounced check and keep it from happening again.
Insufficient Funds: Why Checks Bounce
The only way to prevent bounced checks is to understand why they happen. Most banks refer to a bounced check as “nonsufficient funds,” or NSF for short. This means there is not enough money in your checking account to cover the amount of the NSF check. Because of that, the bank returns the check to the person who received it. The reasons your account lacked the funds to cover the check can vary. They include:
- A delay in your automatic deposit transfer. This can happen when a holiday falls on the day of the transfer.
- An unexpected withdrawal in your account. An unplanned withdrawal is usually due to an early automatic bill or loan payment. Some companies will take an automatic payment before a major holiday, for example.
- The bank locked your account for a few days. If you use a debit card for a large purchase and you have an automatic bill payment coming out on the same day, you can have nonsufficient funds. It can also occur if your bank suspects fraudulent activity on your account. If they see heightened activity on it, they will lock it to protect your account.
- Your check processed faster than you expected. Nowadays, it is easy to convert paper checks into electronic ones using a mobile phone or check scanner, so they travel throughout the banking system faster. So, make sure the money is there before you write a check.
You Wrote a Bad Check, Now What?
Anyone can write a bad check. It’s what you do afterward that matters. Here’s what to do if you bounce a check:
Contact the payee
You’ll need to contact the party you wrote the check to so you can pay them the amount that bounced. The party that received the check can charge you for the returned check. Their fee could be a percentage of the check amount or a straight fee of approximately $20 to $40.
You can also ask them to re-deposit the check if you are sure you have the money to cover it. The recipient of the bounced check can only do this one time and don’t have to if even do this if they don’t want to.
If you can promptly repay the owed money, you shouldn’t have to face any legal problems. However, most states have policies on how long a payee has to wait for a debt resolution before they can take legal steps.
Pay the bank fees
If you write a bad check, you will owe the bank an NSF charge of $25 or more, depending on your bank’s policies. Be prompt about paying the bounced check fee the bank charged for your bad check. You don’t want your bank to report you to a collection or consumer reporting agency.
If you never bounced a check before and your bank account is in good standing, ask your bank to waive the NSF fee. Some banks will waive the charges once for customers with a good track record.
Document, document, and document more
Be sure to get documentation from your bank and the payee that you’ve paid the outstanding check balance and other fees. Consumer reporting agencies like Telecheck and ChexSystems sometimes fail to record a bounced check resolution. You’ll need confirmation numbers and receipts if you have to dispute any discrepancies in your consumer report.
What to Expect if You Ignore a Bounced Check
If you fail to make good on your check, though, you can be in for big trouble. The recipient and the bank can report you to a collection agency. That will damage your credit score because they will report your activity to the credit bureaus.
Worse yet, if you continue to bounce checks, the bank can report you to a consumer reporting agency, such as TeleCheck or ChexSystems. These agencies keep track of your banking history. That means you will face more scrutiny when you write checks, open bank accounts or apply for a loan in the future. Also, your bank may close your account. Those who bounce multiple checks can end up in trouble with the law, as well.
Even if you pay the fees and the amount of the check right away, a bounced check can affect your credit score. For example, if the check was for a loan payment, which means you’ll end up being late on your monthly payments or even missing one. That will affect your credit history.
How to Avoid Bouncing a Check
Although there are many ways to prevent bounced checks, the most effective way is to keep track of your bank account activity and balance. Always know how much is in your account as well as the account activity before writing a check. If you bounce a check, it can take time for the bank to notify you. But by checking your bank statement and account activity online, you can avoid additional charges and bad checks due to a negative balance.
More ways to prevent bounced checks include:
- Signing up for overdraft protection. Avoid bouncing checks by signing up for overdraft protection at your bank. Even though there is a fee for using overdraft protection, it is far less than the NSF charges and other fees.
- Using a debit card. Unlike a check, a debit card won’t work unless you have sufficient funds in your bank account. However, they aren’t foolproof. If a scheduled payment comes out of your account on the same day, you could still get hit with a NSF fee. Nevertheless, debit cards make it easier to handle joint accounts, which are notoriously hard to manage with checks.
- Only write checks if you can cover them. Never write a check thinking you can deposit the money later to cover it. That is a game that you can’t win with today’s quick electronic transfers. Also, this type of activity is a type of check fraud, so you could face legal ramifications.
- Keeping contact information current. If you write a bad check, the recipient should be able to contact you. So, keep your address and phone number current to avoid problems.
Know Your State Maximum Returned Check Fees
Each state sets a limit for the returned check fees merchants can charge. This table illustrates the returned check charges for each state:
| State | Maximum NSF Fee | State | Maximum NSF Fee |
|---|---|---|---|
| Alabama | 30 | Montana | 30 |
| Alaska | 30 | Nebraska | 25 |
| Arizona | 25 | Nevada | 25 |
| Arkansas | 30 | New Hampshire | 25 |
| California | 25 | New Jersey | 25 |
| Colorado | 20 | New Mexico | 30 |
| Connecticut | 20 | New York | 20 |
| Delaware | 40 | North Carolina | 25 |
| District Of Columbia | 25 | North Dakota | 40 |
| Florida | $25 is amount is < or = $50; $30 if amount is < or = $300; $40 if amount is < or = $800; 5% of check amount if > $800 | Ohio | $30 or 10% of check amount, whichever is greater |
| Georgia | $30 if amount is < or = $600 5% of check amount if > $600 | Oklahoma | 25 |
| Hawaii | 30 | Oregon | 25 |
| Idaho | $20 or amount of check, whichever is less | Pennsylvania | 25 |
| Illinois | 25 | Puerto Rico | 10 |
| Indiana | 20 | Rhode Island | 25 |
| Iowa | 30 | South Carolina | 30 |
| Kansas | 30 | South Dakota | 40 |
| Kentucky | 25 | Tennessee | 30 |
| Louisiana | $25 or 5% of check amount, whichever is greater | Texas | 30 |
| Maine | 25 | Utah | 20 |
| Maryland | 35 | Vermont | 25 |
| Massachusetts | 25 | Virginia | 50 |
| Michigan | 25 | Washington | Lesser of $40 or face amount of check |
| Minnesota | 30 | West Virginia | 25 |
| Mississippi | 40 | Wisconsin | 25 |
| Missouri | 25 | Wyoming | 30 |
You Received a Bad Check, Now What?
If you deposited or cashed a check and it bounces, the bank will charge you a return check fee. But you’re not done there. Contact the issuer of the check to explain what happened. Be firm yet polite and take no excuses. If they agree to repayment, that’s all you need to do. If they resist making good on the check, here’s what to do:
- Wait a few days and contact the issuer again. Call the issuer to see if you can deposit the check again. If they say yes, take the check to their bank instead of your own to make sure it is good. If you can’t get in contact with the issuer, contact the bank to report a bounced check from a bank customer. Ask if there are sufficient funds to cover the check before depositing it.
- Send the issuer a bad check notice. Send a formal letter demanding payment to the issuer and the issuer’s bank. Use certified mail with a return receipt request. You should ask them to pay you in 30 days or by the time set in your state’s bounced check laws. Request they repay you the amount on the bad check, the returned-check fee for your state, and the certified mail costs. Make sure to document the issue in case you have to take the next step.
- Take it to small claims court. If the check issuer hasn’t paid you by the deadline you stipulated, you can take them to court. However, the amount of the claim can’t go over your state’s small claim court limit, so find out what that is. In most states, it is from $2,500 to $15,000. You can’t bring a lawyer, so prepare yourself by bringing all the relevant documentation. That includes a copy of the demand letter, as well as the certified mail receipt and return receipts.
| State | Dollar Limit | State | Dollar Limit |
|---|---|---|---|
| Alabama | $6,000 | Montana | $7,000 |
| Alaska | $10,000 | Nebraska | $3,600* |
| Arizona | $3,500 | Nevada | $10,000 |
| Arkansas | $5,000 | New Hampshire | $10,000 |
| California | $10,000* | New Jersey | $3,000* |
| Colorado | $7,500 | New Mexico | $10,000 |
| Connecticut | $5,000* | New York | $5,000* |
| Delaware | $15,000 | North Carolina | $10,000 |
| District of Columbia | $10,000 | North Dakota | $15,000 |
| Florida | $5,000 | Ohio | $6,000 |
| Georgia | $15,000* | Oklahoma | $10,000 |
| Hawaii | $5,000* | Oregon | $10,000 |
| Idaho | $5,000 | Pennsylvania | $12,000 |
| Illinois | $10,000 | Rhode Island | $2,500 |
| Indiana | $6,000 | South Carolina | $7,500 |
| Iowa | $5,000 | South Dakota | $12,000 |
| Kansas | $4,000 | Tennessee | $25,000* |
| Kentucky | $2,500 | Texas | $10,000 |
| Louisiana | $5,000* | Utah | $11,000 |
| Maine | $6,000 | Vermont | $5,000 |
| Maryland | $5,000 | Virginia | $5,000 |
| Massachusetts | $7,000* | Washington | $10,000 |
| Michigan | $6,500 | West Virginia | $10,000 |
| Minnesota | $15,000* | Wisconsin | $10,000* |
| Mississippi | $3,500 | Wyoming | $6,000 |
| Missouri | $5,000 |
How to Avoid Receiving a Bad Check
Some red flags that could help you avoid getting bad checks include:
- Be on the lookout for counterfeit checks: Examine every check for a glossy finish or lack of perforations on the edges. Make sure the name and address of the bank are on the check, too. It should also have the person’s name or business name and contact information on it. That way you can contact them if the check turns out to be bad.
- Don’t accept checks with low numbers: Check with low numbers are indicative of a new bank account. Approximately 90% of bad checks come from recently-opened accounts. Don’t take starter checks unless they are from those you know and trust. Before you accept these types of checks, use a check verification service like TeleCheck to make sure it’s good.
- Check for Federal Reserve numbers: These numbers are usually at the top of the check. The final three or four numbers need to be the same as the first three or four numbers of the routing number on the bottom. If it lacks these numbers, it could be a counterfeit check.
- Contact the payer’s bank: If you are unsure if a check will clear, take it to the bank where the account is before you try to cash it. The bank can let you know if the check is good or not. This will save you from cashing a bad check and having to pay the NSF fee.
A bounced check can send you into panic mode, but these tips should help you fix it fast. With this information, you should be able to avoid them in the future, too.
