Here's What Happens When You Bounce a Check

Uh-oh -- you didn't leave enough money in your checking account to cover a check you wrote. The common term for this is "bouncing a check," and it refers to when a check is returned to its bank of origin because the bank account it's written on has non-sufficient funds, has been closed, or there was some other problem with the check. There are a few consequences for this, and none of them are good. Here's what happens when you write a check your account can't cover.

Fees and more fees

The first consequence of bouncing a check is being charged fees, in a few different ways. Your bank will likely charge you an NSF (non-sufficient funds) or overdraft fee, unless you're with a bank that has phased out these fees. You might also have to pay a fee to the company or merchant you were trying to pay.

If the check was written to pay a bill, you might owe late fees if your check payment couldn't be processed and you didn't offer an alternative payment method before the bill was late. You could also be reported to Telecheck, a service used by some retailers to prevent customers from paying with bad checks. This could make it difficult to pay with checks in the future. It's best to make good on the payment you owe, or the consequences could go beyond monetary losses.

Your banking record could be harmed

Your bank isn't likely to come down too hard on you if you accidentally bounce a check one time, or incidents like this are few and far between and you're otherwise a responsible account holder. But if you make a practice of bouncing checks or overdrafting your account, your bank could freeze your account or close it altogether and report you to ChexSystems.

ChexSystems is kind of like a credit reporting agency, except for bank accounts. If you have too many black marks on your record or a low QualiFile score (generated by ChexSystems based on your banking history), it could be a lot harder to open new bank accounts in the future.

Legal problems or credit score damage are a potential risk

If your bounced check was intentional, in that you knew your account had a lower balance than what you wrote a check for, you may find yourself in legal hot water. Intentionally passing bad checks is illegal, and the consequences vary depending on what state you live in. In New York State, for example, this is a misdemeanor and you'll likely face probation or community service, if you're even prosecuted at all. It stands to reason, however, that if you make bouncing checks a habit, the consequences will grow in severity over time.

If you don't pay the fees you owe or settle up with the company you were trying to pay, the unpaid bills could be sent to a collections agency. Having a bill go to collections will definitely harm your credit score, so this is worth avoiding.

How can you avoid bouncing checks?

There are a few moves you can make to avoid this problem:

• Stay on top of your bank account balance: Knowledge is power, and this is never more true than when it comes to your finances. Download your bank's mobile app and use it to stay informed about how much money is in your account and when payments you've made lower your available balance. You can also opt in for low-balance alerts through the app.
• Sign up for overdraft protection: Your bank might offer overdraft protection, and adding this to your account is definitely a good move, especially if you live paycheck to paycheck and frequently have a lower bank balance. You may be able to link a savings account to your checking, for example, and if you accidentally overspend your account, the difference will be made up with money from the savings.
• Leave yourself a cushion: If you can keep some extra cash (not a lot, mind you -- cash in your checking account often won't earn interest) in your account as a buffer, this is another way to prevent bounced checks and overdrafts.

Bouncing a check is a simple mistake for most people, but it is important to pay the fees you owe when it happens. Neglecting to do so could result in serious consequences like credit score and banking record damage and potentially legal action against you.