What is Bounced Check?
A bounced check (also known as bogus check, rubber check) is an instrument that the bank returns in case the account holder who has drawn the check has insufficient funds in his bank account, and the bank charges NSF (non-sufficient fund) fees to the check writer.
Bounced Check Fees
- Whenever the bank finds that the account holder has insufficient funds for the check drawn, it bounces the check.
- Since the bank had to return the check, it would charge some fees. Imagine if the check would have been passed by the bank even if the account has a lower balance, the account would go into the negative balance. A negative credit balance means a debit balance. The debit balance reflects an overdraft account. Hence, the bank may charge a fee for such overdraft utilisation.
- The charges may be named as non-sufficient funds fees or overdraft fees. As of 2021, the average such fees are $ 35.20. However, the actual charges differ from bank to bank.
Reasons for Bounced Check
Whenever a check is drawn, there is no cash movement from one hand to another. Check is an instrument of trust that the banker will pay the holder of check for the amount written on the check. The holder (i.e., the person to whom the amount is to be paid) does not need to know the actual balance in the holder’s bank account. The holder has trust in the bank.
However, the check may get bounced due to various reasons as follows:
- The check usually gets bounced when the account holder deliberately writes an amount greater than the account balance. For example, say the funds available for use are $ 5600, and he has drawn a check for $ 7500. Of course, the banker will return the check. Though it is illegal to write such checks, there are numerous reasons for doing so. For example, a person with fraudulent intentions will prefer such a method.
- Say the check is drawn on July 15, 2021, and the check writer has closed the account subsequently within few days of writing the check. It is a clear sign of fraud. Even if the recipient presents the check-in due time, the banker will reject the check treating it as bounced check.
- It is not necessary that there would be deliberate reasons for the bounced check. Sometimes the mistake can be bonafide with no intent to harm the recipient. For example, the account holder may have received checks from its customers, which will clear after 3 days, and the account holder has already written a check which will clear after 1 day. There may arise a situation where the balance in the account is not updated for the checks to be cleared in the next 3 days.
- The balance may get reduced after a check is made. This may be a surprise for the issuer as well.
- The writer of the check may deliberately ask the banker to stop payment for any reason. In such a case, the banker is obliged to honour the request of the account holder.
- Coupled with other reasons, a bank may specifically dishonour a check if it finds anything suspicious with the way the check has been written. For example, the handwriting used on figures in words and the account holder’s name may not match, or the date has been overwritten. In such a case, the banker may flag the transaction as suspicious.
How to Prevent Bounced Check?
Bouncing a check is a gesture of bad will. Some genuine account holders may not want such a situation to arise. Therefore, the check writer needs to check few points to ensure that the check does not get bounced:
- Never draw checks in a very cut-to-cut situation. Instead, keep a cushion of extra funds in the account. This cushion will help in case of unexpected payments and will help maintain sufficient balance for checks drawn.
- Be accountable for your account balance. Have a check on your account before writing the check. Keep a record of the sequence of checks drawn and account balance immediately after the check gets cleared.
- In case you know a big payment is to be made and the account lacks sufficient funds, either make part payment at present or make some payment through cash.
- Inform the payee in case of probable chances of check bounce. Explain to them your situation and request them not to present the check for few days. This will save their time, your money and your goodwill.
Impact of Bounced Check
- Every action has some repercussion. Thus, even bounce check some minor and trivial consequences.
- In case you had deliberately written a bad check, there are chances of criminal charges. In addition, the banker may charge a hefty amount of penalty.
- You may be taken to the civil court if the recipient demands so. The judges of civil court may hold that the account holder has deliberately made bad checks, and thus, he may be made liable to pay fees to the court. The court may act as an agent to transfer money from the bad check writer to the eligible recipient.
- Frustration increases for the writer as well as the recipient of the check.
- The trustworthy image of the check writer will derail, and people would never trust him again.
- The name of such writer may be tagged as a high-risk person by customer reporting agencies. This will paralyse the person even from opening a new bank account.
Key Takeaways
- A bounced check is also known as a bogus check, rubber check. It is an instrument that the bank returns in case the account holder who has drawn the check has insufficient funds.
- The account holder would be charged with an NSF fee or overdraft fee.
- A check may get bounce due to several reasons such as deliberate mistake, unintentional mistake, non-availability of funds, stop payments or dishonour by the bank.
- A writer of check may prevent the occurrence of such an event through checking the account balance, managing funds, requesting the recipient to hold the payment, etc.
- The implications of bounce checks can be civil charges or criminal charges, depending on the law of the state.
Conclusion
Bounce check is a gesture of bad will. It reduces the trust of people in the banking system. Hence, many state laws consider this event as a serious matter. However, the penal consequences differ from state to state.
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