NSF Check: When A Check You Wrote (Or Received) Bounces

Bouncing a check can happen to anyone. You might write one, or you might receive one. Various types of checks clear according to different schedules. If the issuer doesn’t have enough money in his or her account to cover a check by the time it clears, the check may bounce — in other words, it will be returned to the payee who tried to cash it.

Whether you write or receive a bounced check — also called a nonsufficient funds, or NSF, check — it will cost you. Write one and you’ll owe your bank an NSF fee of between $27 and $35, and the recipient of the check is permitted to charge a returned-check fee of between $20 and $40 or a percentage of the check amount. If you receive and deposit a check that bounces, you’ll owe a fee to your bank for returning the check, in addition to having the headache of recovering the money you’re due.

However, there are steps you can take to remedy either situation. The key is to address the problem right away. Read on to learn what you can do when a check bounces, how much it costs and how to avoid bounced checks in the future.

What To Do If You Write A Bad Check

Under ordinary circumstances of writing a bounced check, you’ll at most owe fees and the check amount. If you fail to pay, the recipient could involve a collection agency, which in turn will report the activity to the credit bureaus and damage your credit score. Bounce enough checks and your bank might also report you to a consumer reporting agency like ChexSystems, which tracks your deposit account history. Should this happen, you’ll have trouble opening a new bank account in the future. Other, harsher punishments are commonly reserved for consumers who intentionally bounce checks or who don’t pay them back.

In ordinary cases, here’s what to do if you write a bounced check:

• Step 1: Contact The Recipient. Let the recipient know immediately that you’re aware your check bounced.

• Step 2: Make Good On The Check. Either pay the outstanding balance and returned-check fee (if one is charged) or make a payment arrangement, in person if possible. If you’re certain you now have the funds for the check to clear, you can ask the recipient to re-deposit the check (this can be done once only, and the recipient is not obligated to do so).Each state dictates how much time a payee must allow you to repay a debt before he or she can pursue legal action. But rarely will creditors and other billers sue or file criminal charges if you pay quickly or keep your word to pay by installment.

• Step 3: Pay The Fees You Owe To Your Bank. Pay the NSF fee(s) that your bank charged for the bounced check(s). And don't wait too long to do it, or the bank could send the unpaid debt to a collection agency and potentially report you to ChexSystems.If you've maintained your account in good standing and have never bounced a check in the past, ask your bank to waive the fee. Many banks offer a one-time courtesy waive to customers who've demonstrated good consumer behavior.

• Step 4: Ask For Receipts. You’ll want proof from your bank and the payee that you’ve satisfied the outstanding balance and fees. ChexSystems sometimes won’t update a bounced-check record to reflect that the consumer has paid. You’ll need the receipts in case you need to dispute such errors in your ChexSystems consumer report.

What To Do If You Receive A Bad Check

Unfortunately, it can take up to several weeks before your bank notifies you in writing that your check bounced. If you keep spending from your account before learning you deposited a bounced check that put your account balance at a negative, you’ll be charged a fee for every additional overdraft unless you sign up for overdraft protection. You may be able to skip the steps below and resolve the problem informally if the issuer was a friend or relative.

Otherwise, here’s what to do if you receive a bounced check:

• Step 1: Contact The Issuer Of The Check. Announce the situation to the issuer by phone (some state laws restrict calling between 8 a.m. and 9 p.m. local time). When you do, be polite but assertive. You don’t want to let the issuer make excuses about the bounced check to get out of the situation. The fact is that it’s happened, and the problem needs to be resolved. If you’re able to settle the matter during this call because the issuer promised either to pay or to pay by installment, you’re finished. Otherwise, continue to Step 2.

• Step 2: Try To Cash The Check Again. Wait a few days, and ask the check writer whether it’s safe to redeposit the bounced check. If so, go to that person’s bank and cash it there, rather than redepositing the check, to avoid being charged an additional fee if the check bounces again. Keep in mind that payday for many people typically falls at the end of the month, so that may be the best time to try to cash the check. But remember that mortgage and rent payments are usually paid at the start of the month, so don’t wait too long.If you can’t get hold of the person who issued the check, you can contact the bank, let them know you received a bounced check from one of its customers and ask if there are sufficient funds in the account to cover the amount of the check. If there is, cash it at the issuer’s bank instead of your own — to avoid the risk of the account balance changing and the check bouncing again. The bank may also be able to enforce collection, but there is usually a cost to this option, which varies by bank.

• Step 3: Send A Demand Letter. If the issue escalates, draft a formal demand for payment — or a “bad check notice” — and send it to the issuer and the issuer’s bank via certified mail with a request for a return receipt.In your letter, request to be paid within 30 days (or other deadline set by your state’s bounced check laws) for the following: the amount of the bounced check, the cost of certified mail, and the returned-check fee (see “Maximum Returned Check Fees By State” section below). Completing this step is also a prerequisite to taking legal action later, if you need to.

• Step 4: Sue In Small Claims Court. If you aren't paid or simply don't hear back from the issuer by the deadline you stipulated, consider suing in small claims court. To do so, the amount of your claim must not exceed your state’s small-claims limit, which is usually between $2,000 and $5,000. Attorneys cannot represent you in small claims court, so make sure to be adequately prepared by bringing a copy of your demand letter, receipt that you paid for certified mail, return receipts and any other relevant documentation. 

Maximum Returned Check Fees By State

If your bounced check was given to a merchant, that merchant will most likely charge a returned check fee. The amount of these fees are limited by state law. The table below details each state’s ceiling for returned-check fees:

As of June 2015

Source: Chex Systems, Inc.

Tips On How To Avoid Or Deal With Bounced Checks

You can prevent your checks from bouncing, protect yourself from accepting bounced checks and avoid such situations from escalating. Here are some of those precautions you can take:

• Balance Your Checkbook: The easiest way to avoid bouncing checks and incurring hefty NSF fees is to regularly balance your checkbook and reconcile it with your bank statements. By doing so, you’ll always know exactly how much money you have in your account and whether you can afford to write any checks. You’ll also be able to spot errors (or fraud) quickly and rectify the problem before getting hit with undeserved penalties.

• Get Overdraft/Bounce Protection: Another easy way to prevent bouncing checks is to sign up for your bank’s overdraft protection Although there’s a charge for using this service, the fee is always lower than the cost of an overdraft.

• Don’t Write Checks Without Funds To Cover Them: You should never write a check that exceeds your account balance. More importantly, you should never assume you’ll be able to deposit money to cover the check before it clears — or bounces. This practice is considered check fraud, which is punishable by law.

• Look Out For Checks With Low Numbers: Personal-check numbers that range between 101 and 499 (1000 and 1500 for business checks) are usually signs of a new account. About 90% of counterfeit checks come from newly opened accounts, so watch out for starter checks as well. Don’t accept these types of checks unless they’re from people you trust. Otherwise, you may want to use a check verification service like TeleCheck before accepting one.

• Beware Of Fake Checks: A personal check with no perforation on any of its edges or a glossy sheen to it is indicative of a counterfeit check. If it’s missing the bank’s name and address, this may be a sign of trouble as well. Lastly, every check should have a Federal Reserve number (not the check number) at the top, and the last three or four digits should match the first three or four digits of the routing number at the bottom. If it doesn’t have these numbers, you likely received a fake check.

• Go To The Issuer’s Bank: If you’re not sure whether a check you received will clear, you may want to take it to the bank where the account is held before cashing it. They can tell you on the spot whether the check will clear. If it were to bounce, you’d have saved yourself an NSF fee from your bank.

• Update Your Contact Information: Make sure your checks reflect your most current mailing address and phone number. In case you bounce a check and someone tries to notify you, you’ll be able to take care of the problem before the situation worsens.

 

Image: Dooder / Shutterstock