Bounced Check: The True Costs and What You Can Do
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Key takeaways
A bounced check penalty from a bank can be a high-cost nonsufficient funds fee.
Merchants can also charge a bounced check fee; they typically cost $20 to $40.
You could face other consequences for bouncing a check, including being put in a database that monitors people who bounce checks or having the bank close your account.
What is a bounced check?
A bounced check is returned — or bounced — to its original bank because the money is not in the check writer’s account to process it. This can lead to several fees — and probably some headaches. One so-called rubber check could end up costing $65 or more for overdraft, nonsufficient funds and/or merchant fees. If there’s a risk you won’t have the funds to cover a transaction, you might be better off not writing a check for it; consider whether late fees might be the less expensive option if you can delay a payment.
» Did you write a check without enough funds? Here’s how to recover from a bounced check
Bounced check fees: Overdraft and NSF
Overdraft fees. The first fee you could face as a result of bouncing a check technically may not be for a returned check; you might first be subject to an overdraft fee. When a person or business receives your check and deposits it at their bank, if you don’t have enough money in your account to pay it, your bank may still decide to approve the check if you’ve opted for overdraft protection.
But your account balance would go negative, and you would probably be charged an overdraft fee to compensate your bank for the inconvenience. The fee could be $35 or more per transaction.
Another option is to have a backup account, such as savings or a line of credit, from which funds could be transferred to your checking account if an overdraft occurs. Some banks and credit unions charge overdraft protection transfer fees, but the fees are usually much less than overdraft charges.
Nonsufficient funds fees. If your financial institution doesn’t cover the check, it bounces and is returned to the depositor’s bank. You’ll likely be charged a penalty for the rejected check; this is a nonsufficient funds fee, also known as an NSF or returned item fee. This typically costs about the same as an overdraft fee.
If the check is returned to a business, it may also add on some charges.
Merchant fees for a bounced check
Many states allow merchants to charge customers up to $40 for the work of handling a bad check; $30 is most common. Add that to the typical nonsufficient funds fee, and you could potentially be paying $50 or more.
Utility companies and landlords may charge a similar bounced check fee.
Beyond the fees directly related to bounced checks, there can be other problems. For example, a landlord might also have the ability to evict you if you don’t pay the rent plus charges.
» Worried about overdrafting your account? Read our primer on how to avoid overdraft fees
Being put in a database due to a bounced check
If you bounced your check with a merchant, you may be listed in a database maintained by TeleCheck, a check acceptance company. Many merchants use this agency’s database or a similar one before they take your check. It screens transaction histories to flag people with a history of fraud or bounced checks. If you’re in the database, retailers may decline checks from you in the future. To clear your status with TeleCheck, you may have to work with the merchant who received your bounced check. You can also file a dispute with TeleCheck.
Your bank may close your account after a bounced check
If you don't pay the amount of a bounced check within the time frame your bank specifies, it can close your account. Then, you could end up on the database of another reporting agency, ChexSystems. This agency collects information from financial institutions and other companies about customers who’ve had bank accounts closed for overdrafts and other issues. Many banks use ChexSystems to screen people who apply for new bank accounts, so if you end up on file with ChexSystems, it can affect your ability to open a new bank account.
» What to know if you have a history on ChexSystems
What to do if you bounce a check
Follow these steps if you’ve bounced a check:
Reach out to your bank and the check recipient: If you bounce a check, contact your bank and the person or company that received your check as soon as you're aware of the mistake. Explain your situation as a way of showing your good intentions.
Pay up quickly: If you pay up as soon as possible, a bounced check isn't likely to appear on a credit report, so it probably won’t hurt your credit score. If the check goes unpaid, however, it becomes an outstanding debt, and that can be reported by a bank, merchant or debt collection agency to the major credit reporting bureaus: Experian, Equifax and TransUnion.
Avoid bouncing more checks: If you write checks and you’re aware that you don’t have enough money to cover them, you're breaking the law. You could be charged with a misdemeanor or even a felony, depending on the amount and quantity of the unpaid transactions. Simply put, don’t write a check if you know you don’t have enough money in your checking account. If you need to pay a bill, contact the vendor to discuss paying at a later date or in installments.
» Unable to make a payment? Find out what to do when you can’t pay your bills
