Have you ever had your check bounce? For some it may be embarrassing and for others it could be stressful and frustrating. You’re filled with these emotions and worried about any legal troubles, funds available issues, or any damage done to your credit, but what happens next?
So long as this doesn’t happen, you’re in luck. With proper and quick payments you won’t have to worry about a worst-case-scenario.
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Why Do Checks Bounce?
A check that you’ve written may bounce, because of insufficient funds in that account. Maybe you forgot about an automated payment and you wrote a check without verifying that you have enough funds in your account. Maybe your employer was slow or late to pay you and you didn’t realize. There are many possibilities, but it’s clear that you didn’t have sufficient funds.
Of course that isn’t the only reason, perhaps you may have incorrectly signed the check or forgot to fill out a space on the check and it was turned in that way. It can happen to those who don’t double check that they’ve correctly written everything on the check. If you’re not sure on how to fill out a check, then be sure to check out our guides to checks and how to write dollars and cents on a check.
What Should You Do After You Realize It Will Bounce?
If you know ahead of time that the check is going to bounce for financial reasons, then you may be in luck. Checks take several days to actually transfer the funds from your account to whomever you’re paying. In that time they’re given available funds from their banks. If you catch ahead of time that it may bounce, you can quickly deposit and add funds to whatever account you paid from to avoid it from bouncing. The fastest way to fund your account is to bring cash to your branch.
Be sure to reach out. Get in touch with whoever you’re paying and tell them the situation. Most people are just interested in getting their money, so if you’re proactive about the situation and you deal with it quickly, they won’t take any steps towards punishing you. Ideally, you should try to to do this before anyone eve realizes that you wrote a bad check, but it’s still worth a shot after the check hits your account.
Expect Fees. If you deposit a check and it bounces, expect fees. For starters you’re going to have to pay a fee to your bank. Overdraft charges or non-sufficient funds (NSF) can amount up to $35. You may also have to pay a fee to whoever you wrote the check to. This is why you should always double check both accounts and your check before you give it to anyone. If the payee attempts to deposit the check again, you’ll be faced with another round of checks, and after that you may be facing fines and penalties after legal judgement.
Your Credit Report
Bounced checks don’t always show up on your credit report, but they can sometimes. Some banks track the amount of checks that you bounce. If you get too many on your record, it may affect your ability or pay with checks or open accounts. If you have a bad record, checks you write out to grocery stores may not work after they’ve scanned them. Some banks may also refuse to allow you to open an account if you have a back record with bounced checks.
Those databases are not part of your FICO credit score, which is the score used for most big loans like auto and home loans. But “alternative” credit scores might use that information. If the check was for a loan payment, your credit is more likely to suffer. Because the check bounced, payment was never made, and you might end up missing (or being late on) a monthly payment. Late and skipped payments will certainly lower your FICO credit score.
Know that it is ILLEGAL to write checks that you know will bounce, although there are some fuzzy parts with postdated checks. If you don’t clear things up with whomever you’re paying and your bank, you may be facing civil or criminal charges.
Civil Charges will just result in extra costs. The problem is that you probably don’t have extra money which is why the check bounced in the first place. This is why it’s always good to be proactive about the situation and get it dealt with as quickly as possible. If they are successful bringing a lawsuit against you, you may have to pay legal fees, service charges, or a penalty based on the amount of the original check.
Criminal charges have a serious effect on your criminal record, might result in jail time, and are likely to come with higher fines. However, just because you’re threatened with criminal charges doesn’t mean they can successfully bring a case against you. Get in touch with a local attorney immediately if anybody mentions criminal charges.
Debt Collectors and District Attorneys
Most big companies and government agencies don’t have the time or resources to track and hunt down small bounced checks. This is why debt collectors and district attorneys. In some areas they team up with local law enforcement, which can lead people into believing that they are a government agency and plan on filing criminal charges.
Recipients are usually confused and intimidated by them and are ordered to pay the fine. District attorneys provide letterhead and authorize the debt collectors to use the DA’s logo, debt collectors handle the logistics of finding and contacting consumers, and they share revenue with the DA’s office. If you are being targeted by any of these people, know that they must treat you fairly and that they are not part of a government agency.
Prevent Bouncing Checks
It proves to be very difficult to do anything about a check that has already bounced, but the best way to avoid them it to take preventative steps towards it.
Balance Your Account. Banking is a balancing act. You must control what comes in and what goes out. Always be mindful of the amount of money that you have in your account and any other payments, charges that may be on your account.
Have Emergency Funds. It’s always good to have an emergency savings account that you can use in these situations. Every paycheck deposit around 5%-10% of it into your emergency funds for situations like this. Even if you perfectly balance your account, it’s always good to have one just in case.
Pay With A Debit Card. Credit cards give people the ability to spend money they don’t have. If you can’t control this and have a hard time balancing out your credit spending with your income, stop using them! Use a debit card. With those you can only spend what you have in your account. It may not give you any rewards or bonuses, but it’ll definitely keep you from over drafting and picking up debt.
Hopefully you will never find yourself in a situation where you’ve written a check that bounces. Remember to take the preventative steps to avoid that issue from ever arising, and if it does ever happen, be proactive and show intent towards paying the payee. If you found this post interesting be sure to check out our Bank Bonuses, Saving Rates and Credit Card Bonuses!