How to Handle a Bounced Check

A bounced check occurs when the check writer doesn’t have enough funds in their account to cover the check amount, resulting in having the check sent back to them. It’s certainly an inconvenience, but bounced checks aren’t always a sign of nefarious business or lost money. There are steps you can take when you encounter a bad check, whether you’re on the writing or the receiving end.

Why do checks bounce?

Checks “bounce” back to the writer when the recipient tries to cash or deposit a check that can’t be processed because of nonsufficient funds (NSF). 

The underlying reasons for a bounced check might vary. The check writer might have written the bad check by accident, unaware that they didn’t have enough money in their account at the time. However, scammers use this tactic to pay for goods or services by check, knowing that the recipient won’t find out about the lack of funds until later.  

What to do if you received a bounced check

For starters, don’t panic. There’s a chance the bad check was a mistake, particularly if it’s a personal check written to you by someone you know. 

Unfortunately, you could face a returned deposit item fee for a bounced check, even though you’re not at fault. Further, if you assumed the funds were already yours, you could face NSF or overdraft fees for trying to use money that isn’t technically in your account yet.

1. Contact the check writer

The first step is to contact the person or company who wrote you the check. Let them know that the check bounced when you tried to deposit or cash it. The goal is to clear up any misunderstanding and ensure the check writer puts enough money in their account for you to redeposit the check. 

2. Try to cash the check again

If the check writer will deposit more money into their account, wait a few days for their deposit to clear. You then might want to go to their issuing bank to cash the check instead of redepositing it into your account. That way, the issuing bank will be able to determine immediately whether the check writer has enough funds to cover the check. 

Of course, you can try to redeposit the check. There’s no hard and fast rule about how many times a returned check can be redeposited, but, generally, banks might try redepositing the check twice after a failed attempt. Again, however, you might have to wait a day or two for the funds to become available, and there is a chance that the check will bounce again. 

3. Send a formal demand letter

If the problem persists, consider sending a formal letter via certified mail demanding payment. This is known as a bad-check notice, and it shows the writer you mean business. It also provides evidence if you have to take the matter to court. 

You should include the following in your letter: 

• Check information (check number, date and amount)
• Parties involved (to whom the check was written and who wrote and signed it)
• Why the check was returned (nonsufficient funds, for example)
• How the check writer should pay you
• Amounts owed (in addition to the check amount, include bank fees you might have incurred during the process)
• Payment deadline (how long the writer has to pay you)

Each state might have its own laws surrounding bad checks. Take a look at what your state requires and include any additional information in your letter. 

4. Take it to court

If your bad-check notice letter goes ignored, you can consider suing the check writer. The case likely will go to small-claims court unless the check exceeds your state’s small-claims amount limit. 

Make sure you collect all evidence related to the case to present in court. This includes the check, bank statements, bank receipts, the bad-check notice and any correspondence between you and the check writer. 

Depending on your state laws and the presiding judge, the payment could be sent to collections to ensure you get paid, or you could be awarded up to three times the check amount. 

What to do if you bounced a check

Again, don’t panic — accidents happen. You shouldn’t end up in small-claims court for writing a bounced check unless you’re noncompliant. 

1. Contact the check recipient

Make the recipient aware of the circumstances and let them know that you’ll fix the situation as soon as you can. Be honest about your timeline. If you can’t have the funds available until the end of the week, be sure to communicate that. It helps to be communicative along the way, too. 

If your check recipient is a business, ask them if you owe a returned check fee. If the recipient is a friend, you may want to ask whether they were charged a returned deposit item fee and offer to cover those charges. Even if you don’t bring it up, you may still want to add that amount onto your original check amount to cover the fee they likely incurred. 

2. Make the payment 

As soon as you’re able, deposit the funds into your account. Don’t forget about any extra fees you might owe now, too. Be extra careful not to spend that amount. Put yourself on a spending freeze, if need be. 

After the funds are available in your account, let the recipient know they’re clear to cash or redeposit the check. 

3. Pay your bank fees

When a check is bounced back to you, you likely will face an NSF fee from your bank. This might be labeled as a deposited-item-returned fee, but some institutions might charge separate fees: one for not having enough money in the account and one for the returned item. 

The exact amount varies from bank to bank, but based on state law maximums, you probably will face a fee between $10 and $50, although it could be more in some states. If you generally keep your account in good standing, contact the bank and ask them to waive the fee. 

4. Keep documentation

Unfortunately, writing bad checks shows up on your ChexSystems report, which tracks your banking history. After the check payment goes through, keep your receipts and bank statements to prove that you made good on that payment. This will come in handy if you have to dispute an item on your ChexSystems report. 

What happens when you bounce a check

Bouncing a check can be harmful to your finances if you aren’t careful. Below are a few consequences you could face if you write a bad check.

You’ll face bounced-check fees

The fees you could face for bouncing a check are: 

• Nonsufficient funds fee
• Returned-item fee
• Overdraft fee

The NSF fee is the fee you most likely will face. This fee, which typically runs between $10 and $50 but could be more, charges you for not having enough money in your account to cover the check amount. 

A returned-item fee also might be charged for the return (bounce) of the bad check. However, some institutions consider an NSF/returned-item fee as one and the same. 

If your bank covers the cost of the check for you, you also could face an overdraft fee. Overdraft fees vary by institution but typically fall around $35. 

You could face legal action

Purposely writing bad checks is illegal and can result in civil and criminal penalties. For example, in California, you could be charged with a misdemeanor or a felony, face up to three years in county jail and owe a fine of up to $10,000 if convicted of a felony. 

The check recipient also could take you to civil court, where you might face further penalties. 

Of course, legal trouble can be avoided if you follow the steps outlined above, making sure to pay up and demonstrate that you didn’t intend for the check to bounce. 

You could damage your credit score

A bounced check could damage your credit score if you wrote the check to pay a bill, such as for your mortgage. The creditor could report that as a late payment to credit-reporting agencies, which will add that to your credit report.

If you allow the payment to go unpaid for too long, it might be sent to collections and worsen your credit standing. 

Note that although a bounced check might be reported to ChexSystems, that doesn’t affect your credit automatically. 

You could have trouble banking in the future

If writing bad checks becomes a habit, those instances will pile up against you. For starters, your bank might close your account. And if all those bounced checks appear in your ChexSystems report, you might have trouble opening a new account — not just at that institution, but also at others. Many banking institutions check your ChexSystems report when deciding whether to approve you for an account, and a history of bounced checks is likely to be unappealing. 

However, there are several second-chance bank accounts, where the institution doesn’t check ChexSystems or doesn’t use that history for specific account approval. 

How to avoid bounced checks

Whether you’re the one writing checks or receiving them, there are a few ways to avoid bounced checks. 

As the check writer 

• Keep an eye on your account balance. It helps if you have your bank’s mobile app (if it has one) so you can check your account balance at any time. That way, you can make sure you have enough money in your account before you write a check.
• Make a budget — and stick to it. Sometimes, keeping an eye on your balance isn’t enough if you’re spending left and right. Create a budget and follow it, so you can avoid overspending and potentially not have enough money in your account when it’s necessary. 
• Consider overdraft protection. Overdraft protection allows you to avoid an NSF fee by getting the bank to cover the expense of a purchase or, in this case, the check amount. However, you likely will face an overdraft fee instead. Another way to avoid the overdraft fee is to link your checking and savings accounts, so if you overdraw your checking account, the bank will use funds from your savings account to cover the difference, but banks might charge a fee for that. 

As the check recipient

• Verify the check is legitimate. Before you try to deposit the check, you might want to double-check whether it’s real, particularly if you’re less familiar with the check writer. Look for watermarks and a valid routing number. If you’re a frequent recipient of checks, consider signing up for an online check-verification service. 
• Charge a fee for bounced checks. If you run a business, consider charging fees when clients bounce checks. This hopefully will deter anyone from risking a bad check. 
• Don’t accept checks. Instead, consider asking for a money order or a cashier’s check, which guarantees that funds are tied to the check. Of course, you also could ask for cash or an online transfer, too.