When a check bounces, it means that the writer of the check has insufficient funds available to fulfill the payment amount on the check to the payee. The consequences of a bounced check can include:
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Penalty fees: The bank may charge the account holder a nonsufficient funds (NSF) fee for bouncing a check, which can range from $26.58 to $65 or more. The payee may also charge a late fee if the bounced check means that the payment is now overdue.
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Overdraft fees: If the account holder has opted for overdraft protection, the bank may still decide to approve the check, but the account holder may be subject to an overdraft fee.
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Banking restrictions: Writing too many bounced checks may prevent the account holder from paying merchants by check in the future, and may also result in restrictions on writing additional checks.
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Negative credit score marks: Writing too many bounced checks may also have negative impacts on the account holders credit score.
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Legal trouble: Additional penalties for bouncing checks may include potentially legal trouble.
If the payee deposited the check and it bounced, the bank can reverse the deposit and charge the payee an NSF fee or "returned item" fee. If the account holder doesnt pay the amount of the bounced check within the time frame specified by the bank, the bank can close the account, and the account holder may end up on the database of another reporting agency, ChexSystems, which can affect their ability to open a new bank account.
To avoid bouncing checks, account holders can use caution when accepting checks from someone they dont know, and can opt for overdraft protection. If an account holder writes a check without enough funds in their account, they could be charged with a crime.
