If you write a check but there are not enough funds in your account to cover it, the check will bounce. While this can leave you feeling embarrassed, it may also result in fees, possible negative effects on your credit score, and several other issues. To avoid this scenario, don’t write a check unless you’re positive you have the money in your account to pay for it.
What is a Bounced Check?
A bounced check is a check that can't be processed because there aren't enough funds in your account to cover the payment. When a check bounces, it will be returned unpaid to your bank, and you'll likely face fees.
What Happens When You Bounce a Check?
Now that you know what a bounced check is, here’s an overview of the consequences you may face if your check bounces.
The Payment Doesn’t Go Through
When you bounce a check, the individual or company you wrote the check to will not receive the money you intended to give them. Your payment will get rejected and the check recipient may or may not reach out to let you know.
You Could Face Fees
If your check bounces, you may receive a returned check fee. This fee will be charged by the recipient of the check as a penalty for trying to distribute money that you don’t have. You might also owe a non-sufficient funds or NSF fee to your bank, which can run you anywhere between $20 to $40 or a percentage of the check amount.
Your Credit Score May Be Impacted
Your credit score may take a hit if you bounce a check and don’t take care of the issue in about 30 days. This is because an unpaid check can make its way to collections and onto your credit report. In addition, if the check is for your mortgage, car loan, or another bill, the lender may report your late debt payment to the credit bureaus.
Your Account May Be Reported
If you bounce checks often, your bank may report your account to a consumer reporting agency, which tracks your deposit history. In the event that this happens, you may have trouble opening bank accounts at other banking institutions.
What Type of Fees will you Have to Pay if you Bounce a Check?
If you write a bounced check, there are a number of fees you may have to pay. One of the first things that may happen is your bank might charge you with overdraft fees or nonsufficient funds (NSF) fees. You may then have to pay a fee to the recipient if they get charged for depositing a bad check. Depending on the state you're in and who you sent the bounced check to, you may also have to pay merchant fees.
What to do if you Bounce a Check
If you write a bounced check, follow these steps to protect yourself and your finances.
Contact the Payee
Get a hold of the payee and inform them that you don’t have funds for the check, as being proactive will benefit you in the long run. Ask if they can hold the deposit until a later time.
Make a Payment Arrangement with the Recipient
Work with the recipient to come up with a plan on how you’ll pay them. Maybe you’ll cover the payment via credit card, or perhaps you’ll write a new check in two weeks when you get your paycheck and will have enough funds in your account.
Pay the Fees You Owe the Bank
If your bank charges you fees for your bounced check, pay them and move on. Don’t delay payment or ignore the fact that you owe these fees. Doing so can put you in poor standing and damage your relationship with your bank.
How to Avoid a Bounced Check
Now that you know what to do when you bounce a check, here are some great ways to avoid a bounced check:
Keep Track of Your Account Balance
Check your account balance on a daily or weekly basis. This way you’ll know how much money you have in your account at all times. You can also sign up for alerts and get notified every time your balance dips below a certain threshold.
Get Overdraft Protection
If you enroll in overdraft protection through your bank, your checks will go through, even if you don’t have sufficient funds in your account. But if you choose this option, be aware that you’ll probably be responsible for overdraft fees, which can be expensive.
Only Write a Check if You Can Cover the Payment
Before you write a check, stop and think about whether you can cover the payment. If you’re unsure, check your account balance online or via phone or mobile app. Don’t write a check unless you’re positive you have enough funds to pay for it.
Save Extra Money in Your Account
It’s a good idea to leave some extra money in your account. Even an extra $50 to $100 can save you from writing a bounced check and all of the consequences that come with it.
Pay with a Debit Card
If you’re unsure of whether you have enough money to cover a check, try to pay with a debit card. As long as you haven’t signed up for overdraft protection, your card will automatically get rejected if you don’t have enough funds.
What to do to Prevent Your Next Check from Bouncing
Sometimes, you need money to pay a check right away. If you come across this situation, consider a loan to keep your check from bouncing. Advance America offers online loans, such as payday loans and installment loans that can get you cash quickly, even if you don’t have great credit.