What does it mean when a check is returned?

What is a returned check?

Generally, a returned check is one that a bank declines to honor — typically because there’s not enough money in the check writer’s account to cover the amount of the payment. You might know this situation as a “bounced check,” while the bank calls it “nonsufficient funds,” or NSF.

When might a check bounce?

When you don’t have enough funds in your checking account to cover a check, then the check can bounce. This is typically an honest mistake. For example, you may have forgotten that you scheduled an automatic payment, or an expected deposit didn’t hit your account in time.

There are other reasons a check might be returned. A financial institution may return the check if you ask the bank to stop payment, if the recipient tries to deposit it months after the date written on the front, or if you post-date a check. And if any critical information is missing on the check, such as a signature, the bank might reject it then, too.

Some people might intentionally write a check despite knowing they don’t have sufficient funds in their account to cover it. This is generally against state law.


Make a Police Report

As a last resort, hand over the bad check to the local police agency. Knowingly writing a bad check with intent to commit fraud is a crime. Consider involving police if you can’t reach the person who wrote the check after repeated tries or receive no response to your calls and letters within a reasonable amount of time. Inform the check writer of your intent to contact authorities. Don’t threaten the check writer or call constantly as that may be construed to be extortion, harassment and verbal abuse. Be sure, though, that this is a step you want to take because you are not see this customer again if the matter goes to court.

Contact the Customer

Call the customer. Good people occasionally make mistakes, and giving your customer a call, and letting him know what happened often can solve the problem. Let the customer know the amount of the check, as well as any fee you need to pay your bank. The oversight will embarrass many people, and they will make good on the check.

What to Do if You Get a Bad Check

If you’ve received returned checks as a merchant or simply as an individual, you may wonder how to interact with people who write bad checks (to get the money you were owed). Ideas include:

  • Just ask: For starters, try to collect the money. Contact the check writer and request that they make good on the payment. It may have been an honest mistake, and they may have every intention of paying you. This is one reason it’s good to verify that checks always show a current phone number.
  • Visit the branch: You can also go to a branch of the bank the check draws on and try to cash it. The money you need (if it exists) will be at the check writer’s bank, not yours. When you visit the bank in person, you may also be able to avoid a returned-check fee for depositing bad checks.
  • Time it right: If you’re fortunate, you’ll be at the bank shortly after the check writer has deposited money. The beginning or end of the month might be a good time to try and collect if the person gets paid with direct deposit. You can also try to save yourself a trip by calling the bank and asking to verify funds on the check. Some banks will be unwilling to verify funds because of privacy concerns, but they may still confirm whether the associated bank account exists.
  • Seek out legal remedies: If the check writer will not make good on the returned check, you may have to take more aggressive actions to get your money. For example, you might have to write a demand letter, and if that fails to provoke payment, file a lawsuit against the check writer or send their account to a collections agency.

Each state has different laws on how to handle returned checks and the associated penalties and dollar limits. Contact your bank or your local district attorney’s office for instructions on how to deal with any returned checks you currently have.

What should I do if I have a check returned?

If you wrote a bad check, it’s important to act right away.

  1. Make a deposit to cover the payment and any bank fees. Merchants may submit bounced checks for payment more than once. Put money into your account to cover the amount in case the merchant resubmits the check. And you’ll want to have enough in the account to cover any bank fees that might arise.
  2. Communicate with the payee. Hopefully, you can tell the payee you’ve made a deposit to cover the returned check and any associated fees. Or, if you’re not able to pay right away, you may be able to negotiate a payment plan with the payee. Either way, it’s important to communicate with the recipient to help minimize the negative impact of a bounced check.
  3. Address bank fees. Banks can take fees directly out of your account. But you can ask your bank to waive the fees. It’s not obligated to let you off the hook, but if you’ve got a good history with your financial institution, it may make an exception. You’ll never know unless you ask.

Special Considerations

Some institutions may waive returned payment fees in certain conditions. For example, they may waive the fee for a first-time occurrence or for customers with accounts in good standing. Others may also waive the fee in case the consumer has a good reason why the payment was rejected. It’s always best to talk to your financial institution if there was a viable error for which you had no control.

A returned payment fee often comes along with late payment fees and interest. If you try to pay your credit card bill at the last minute but your payment doesn’t clear, your monthly minimum payment becomes overdue, and you will owe a late fee. A few credit cards do not charge late fees at all or will waive the late fee the first time the customer has a late payment.

Even if a late fee doesn’t apply, interest charges will almost always apply. You may also be subject to an increase in your interest rate if your returned payment means you’ve missed your minimum payment deadline. Your bank may also charge you an insufficient funds fee—also known as an NSF fee—for writing a check that didn’t clear.

What is an overdraft fee or a returned item/non-sufficient funds (NSF) fee?

An overdraft fee is assessed when an item such as a check, debit card purchase, or other transaction presented for payment is paid by the Bank even though the available balance in your deposit account is less than the amount of the item.

A returned item/non-sufficient funds (NSF) fee is assessed to business accounts when an item such as a check or other transaction presented for payment is returned unpaid because the available balance in your deposit account is less than the amount of the Item. This is also called a “bounced check.” We do not assess returned item/non-sufficient funds (NSF) fees on consumer accounts. However, third parties or other banks may assess fees for returned transactions.

How can I avoid getting bad checks?

If you want to make sure you won't be paid with a bad check, you can request that payment be made with a cashier's check, certified check, or money order. These must be either paid in advance or verified by the bank issuing them, so you know they are covered by sufficient funds.