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From the Experts at Credit.com

What You Need to Know About Bounced Checks

by Gerri Detweiler

What You Need to Know About Bounced Checks

Before I went on vacation a few years ago, I wrote a large check to pay a bill before the money was in that account. My plan was to stop by the bank before I left to deposit a check from another account to cover it. But in the rush to leave, I overlooked that item on my to-do list.

I was lucky. The check was written to an out-of-state company and it didn’t clear in the week I was gone. I was able to deposit the money when I returned and avoid a bounced check.

But today my forgetfulness might have cost me a small fortune – or worse. It may have ended up in collections and hurt my credit scores for years to come.

Bounced checks (a.k.a. “rubber” or “non-sufficient funds” — NSF — checks) are an expensive hassle at best. At worst, they can result in criminal prosecution or even cost you the job you want.

They occur more frequently today thanks to electronic check clearing, which means banks don’t have to actually process your physical check. Digital “substitute checks” can now be presented instead. That means checks can clear within a few hours instead of a few days.

There are lots of ways to bounce a check:

  1. You forget to enter a check, debit purchase, or automatic withdrawal in your checkbook and think you have more money in the account than you do.
  2. Your spouse forgets to tell you that he or she used the debit card.
  3. You don’t balance your checkbook.
  4. You write a check expecting to be able to make a deposit before it clears.

  5. You write a check knowing that you don’t have the money to cover it.
  6. Your bank or credit union makes a mistake and your account shows less money than it should.
  7. Your debit card is used by a crook (or maybe a friend or relative who decides they need your money more than you do).
  8. Your bank indicates a balance that includes available overdraft protection (see below) rather than your actual balance.
  9. Someone writes a check to you, you deposit it, and their check bounces. You’ll probably pay a fee to your bank for depositing the bad check, and if you’ve written checks against that balance, your checks will bounce.

The Legal Issues

State laws address the penalties for writing bad checks. There are generally two types of penalties for NSF checks: civil and criminal. Civil penalties address how much the recipient can collect after receiving a bad check. In some states, this can be much more than the amount of the bad check, and may include double or triple the amount of the check plus attorney fees and damages.

Under criminal penalties, you can be prosecuted and even arrested for writing a bad check. Bounced checks typically become criminal matters when there is an intent to defraud on the part of the person writing the check. The majority of bounced check cases do not involve criminal penalties, as most people cover a bad check as soon as possible.

Are You Really In Trouble?

Consumer advocates have been concerned about the use of “check diversion companies” in some areas of the country. These are private, for-profit companies that are in the business of collecting bad checks. They may work under a contract with the District Attorney’s (DA’s) office even though they are independent companies. Their collection notices may even seem to come from the D.A. (or with approval of the D.A.). These companies have been criticized and sued for:

  • Demanding excessive fees (as much as $200 for a $20 bounced check),
  • Failing to give consumers the opportunity to dispute the debt, and
  • Falsely implying that consumers will go to jail if they don’t pay the debt, even though no crime has been committed.

In 2006, Congress passed a law regulating check diversion companies. If a check diversion company is under contract with the District Attorney, it is not covered by the Fair Debt Collection Practices Act, which regulates outside debt collection agencies. However, this doesn’t give these companies free rein to say or do anything to collect. If you don’t believe the amount they are trying to collect is correct, you can ask them to verify the debt. Send a certified letter requesting verification of the debt right away and keep a copy for your records. They must get back to you within 30 days.

If your check is picked up by one of these check diversion companies, you will likely get a letter threatening penalties and possible criminal prosecution if you don’t make good on the check quickly as well as pay fees and penalties. (The District Attorney offices they partner with receive some of that revenue.) You may also be required to participate in a class on financial management. For example, the Los Angeles bad check restitution program requires participation in an eight-hour financial management program.

If you are being strong-armed about a debt related to a bad check, consider getting legal advice, especially if a debt collector tells you that you will be arrested if you don’t pay up on a bounced check immediately. A consumer law attorney can advise you on your rights.

As with any debt, you’ll find there is a state statute of limitations regarding the length of time for collecting on bounced checks. If someone tries to sue you for a bounced check and the statute of limitations has expired, you can raise that in court as a defense and the accuser would likely be unsuccessful. Your state attorney general’s office can give you information on your state’s statute of limitations for bad checks.

It Adds Up

The average bounced check fee is over $27, according to Bankrate.com. That’s just the fee you pay to the bank; you could be on the hook for another $25 or more to the company or person that deposited your rubber check. One check could set you back $50 in fees alone!

But it gets worse. If your bank receives several checks on the same day against your account, it may pay the largest checks first, which leads to more of the smaller ones bouncing. That means you pay a lot more in fees, and it is much more difficult to catch up.

Convenience at a Price

Given all these warnings, you may think that the “automatic overdraft protection” some banks offer is a godsend. With these programs, you don’t have to sign up for a line of credit. The bank will simply cover your bad check and charge you a “convenience fee.” But that convenience comes with a steep price. According to the Center for Responsible Lending and other consumer organizations, the fees these overdraft programs charge rival those of “payday lenders,” who have a reputation of charging outrageous fees. In fact, overdraft protection program fees can result in an equivalent Annual Percentage Rate of 2000 – 7000% or more. (And you thought credit card interest rates were high!)

Your Credit May Suffer

Bounced checks don’t usually show up on traditional credit reports, unless you are sued or the balance is turned over to a collection agency. But if you write a check to pay a bill to a company that reports to credit bureaus, and it bounces, the late payment may show up on your credit. Additionally, bounced checks may be reported to specialized consumer reporting agencies such as ChexSystems or Telecheck. These agencies collect information about how consumers have handled bank accounts and report that information to financial institutions as well as to retailers who accept checks.

Negative information remains in ChexSystems or Telecheck for five years. You have the right to check those reports for free once a year and to challenge any mistakes. To obtain your free annual ChexSystems report, visit Chexhelp.com. To check your Telecheck report, visit Telecheck.com.

If you have already been listed in ChexSystems and you are having trouble opening a bank account, you may need to look for a bank that doesn’t use ChexSystems. You can also try a credit union if you are eligible to join one.

A few banks may check a standard credit report before opening a bank account, or they may check your credit if you request an overdraft line of credit. If you are concerned about whether you credit report will be reviewed if you open an account, be sure to ask about the bank’s policy.

In addition to these specialty consumer reports, you will want to monitor your free credit score. A significant change in your score in any given month will alert you to take a closer look.

Stay Clean

With all these possible costs and complications, you can see why it is important to make sure you don’t bounce a check. Here’s how to protect yourself:

  1. Sign up for an overdraft line of credit, or find out if you can use your savings account as protection if you accidentally write a check and there is not enough money in your account.
  2. Balance your checkbook, or at least become fanatical about writing transactions in your checkbook and keeping a running total.
  3. Remember to enter recurring debits in your checkbook.

Monitor your accounts online and set up online alerts to your email or cell phone if your balance dips below a certain amount.

Find Out Where You Stand

You can check your credit score each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.


  • tired of a Fraudulant Employer

    i know of a employer who writes bad checks to his employees an he knows there isn’t sufficient funds in the acct. and he never deposits any money in and constantly writes checks from it with no remorse about it

  • http://www.credit.com/ Credit.com Credit Experts

    We are not lawyers and, unfortunately, a lawyer can best answer your questions. It’s unclear whether you are a joint account holder with your mother or what you mean when you say you “borrowed” her checkbook. Those are points you may want to clarify when you seek assistance.

  • Dawn

    I had someone write me a bad check in july of 2011, she kept saying she would pay me but never did and i lost all contact. but now aug 2014 i found out where she is can i still collect on it.

    • http://www.credit.com/ Credit.com Credit Experts

      Checks are considered “stale-dated” if they are more than six months old. Although state laws can vary on how long a check is good, it is doubtful a bank would cash a check that old. Your best bet might be to ask the person to write you a new check.

  • http://www.Credit.com/ Gerri Detweiler

    I am sorry but I just don’t understand the scenario you are describing…

  • http://www.Credit.com/ Gerri Detweiler

    Are you sure it actually bounced? Are you sure you’re not talking to a debt collection scammer? How did they notify you about this check bouncing? It sounds suspicious to hear about it two years after the fact. There are a lot of collection scams related to payday loans and I’m concerned that’s potentially what you’re up against.

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    Are you banking at the same place the NFS originated from?

  • amanda

    By law can a company attempt to withdraw a bounce check multiple times?

    • http://www.credit.com/ Credit.com Credit Experts

      Amanda —
      We’re not lawyers, but a little Internet research suggests it can be re-presented at least two additional times, and it can be done electronically. A customer can also be charged fees, both by his or her bank, and by the a merchant who has a bounced check fee.

  • http://www.Credit.com/ Gerri Detweiler

    Have you looked into taking her to Small Claims Court?

  • cams

    A friend deposited a check to my account since he has no bank account yet. Before the check clears, I noticed on my online bank account that the deposit was deducted and classified as RETURNED CHECK. Later did I know that he just forged the signature of the checkbook owner (his Aunt). Would I be liable on this even if I am not the one who made the deposit? The bank called me and told me to pick up the Returned check from them.

    • http://www.Credit.com/ Gerri Detweiler

      I don’t see why you would since he forged the check but I don’t know for sure. You didn’t spend the money he deposited, right?

  • http://www.Credit.com/ Gerri Detweiler

    It’s not good, obviously, but it may not affect your ability to refinance. Did you resolve it right away? If so, it shouldn’t have gone on your credit reports. Certainly the bank will have internal records but that may or may not be a factor. Sometimes it’s the credit report that they check and rely upon and bounced checks typically don’t appear on credit reports unless they go to collections. Another option you may want to consider is working with a credit union that offers car loans nationally.

    The other thing you will want to do is to ask Bank A if they report the bounced check to TeleCheck or ChexSystems. Just be upfront and honest with them; these things happen all the time. Tell them you’re trying to build good credit you want to make sure that this bad check someone wrote you doesn’t sabotage the process. If they do report to either those bureaus you can request a free copy of your report each year. Those reports are used primarily when consumers open checking accounts, not when they apply for loans.

  • Jeanie

    Here’s my problem: In Dec, 2008, after going broke and using up all my savings, I had $52 in my checking account with one outstanding check for $25, written in August 2008. I also had a credit card with this bank so in the discussion of my not being able to pay my monthly payment of $325, I asked what would happen with my checking account. Banker said, account will close in 30 days. Knowing I had that outstanding check for $25, I sent the party a new $25 check from an account with another bank and withdrew $50 from the account about to close, leaving $2 because they usually charged a $1.00 fee for ATM use.

    Anyway, In late Jan, two things occurred, Bank 1 reported me for writing a bad check–for the $25 check and the credit card bill of $325, both of which they paid because I had a check guard thing that I’d forgotten about because I never used it–I had stellar credit with this bank for 20 years or more and I have never written a bad check. Anyway, so Bank 2 closed my account because of the check charge also. So for two months I was selling household furniture to survive until my Social Security kicked in, which amounted to $682, not enough to live on or pay amount owed on that check charge or on anything else. I might add that I still have that returned letter containing the second check written for that $25, still unopened, my only proof that I was not defrauding anyone.

    But what I think is outrageously punitive is that now, almost six years later I still can’t cash a check written to me that isn’t a third party check. Last week, I received a check from Amazon for $58 and tried to cash it at two banks—one of them the issuing bank—and both said I had to have an account to cash it, though no bank will give me one. Nor would Walmart cash it as they’re tied into the same system: Certegy.

    So how long will I be punished for this crime of going broke?

    • http://www.Credit.com/ Gerri Detweiler

      Have you obtained your report from Certegy? You can get it for free – you will find instructions on their website. Negative information may remain for up to seven years so you want to check that the dates on there are correct.

  • http://www.credit.com/ Credit.com Credit Experts

    Who is “they”? Your daughter is very unlikely to be arrested. It is, however, possible she could be sued. Generally, though, a warrant for an arrest is an empty threat.

  • http://www.Credit.com/ Gerri Detweiler

    Karin – it’s hard to say exactly what’s going on but I suspect it will be difficult for you to collect from this person. You may want to consider taking them to Small Claims Court. I understand your hesitation but this is a fairly large amount of money, and if he keeps writing you checks that bounce it’s going to create additional problems for you,


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  • Meet Our Expert

    gerri_detweiler GravatarGerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.
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