What Is a Bounced Check?

Whether you’ve written or received a bounced check, finding out that a check has been rejected can be frustrating. When a check bounces, it means the bank cannot process the check for various reasons, including insufficient funds. The check writer may miss a payment deadline, and the payee doesn't receive the funds they may have been counting on.

Dealing with these situations can take both time and money. The repercussions may go beyond a simple fee, depending on the circumstances.

Let’s explore why checks bounce, some potential consequences and tips to help avoid bounced checks.

Why do bounced checks happen?

When you deposit a check, the bank processes it, ensuring that the source of those funds is legitimate and has enough money to cover the amount. There are several factors that can lead to a bounced check:

• Insufficient funds
• Frozen or closed accounts
• Check writing issues, such as a misspelled name
• Stop payment orders
• A check more than 6 months old
• A fraudulent check

What happens if a check bounces?

Here are a few potential examples of what could happen after a check bounces:

1. The check recipient may be notified that the check didn’t clear, while the check writer may not be notified
2. Either party may be charged a fee, and the recipient may see any previously credited funds reversed
3. Either party may reach out to arrange for a new check or form of payment
4. If the recipient can’t get their funds from the check writer, they may choose to send a demand letter via certified mail
5. If the check writer still does not pay, the recipient may choose to take them to court to recover the owed funds

You should be aware that bounced checks don’t directly impact credit and are not reported to the credit bureaus. However, if a bounced check means a payment deadline is missed for an account that does report to the credit bureaus, it could have an impact on the check writer’s credit.

Potential costs of a bounced check

A bounced check can sometimes come with certain consequences, such as:

• Fees: These fees might include nonsufficient funds (NSF) or overdraft fees for the check writer, as well as a returned check charge for the intended recipient. The amounts will depend on a bank's policies.
• Negative marks on your bank account report: If someone makes a habit of writing checks that bounce, especially if they also frequently overdraw their account, they may have trouble opening a bank account in the future.
• Delayed payment processing: The payee will generally have to wait for a new check to be issued and credited to their account if the original check bounces.
• Legal and criminal liability: Depending on the circumstances, if a check bounces, a payee may be able to take legal action. The check writer may also be criminally liable if a check has knowingly been written with insufficient funds.

How long does it take for a check to bounce?

Checks can be processed as quickly as the same business day, with most clearing within 2 business days. However, if there are issues with the check, your bank may place an extended hold on it, which can last 7 to 9 business days. It may take that long for a check to bounce as the bank attempts to work through the verification process.

Keep in mind that even if a payee sees some or all of a check's value deposited into their account, that doesn't mean it won't ultimately bounce. Banks are required to make at least a portion of deposited funds available quickly. If a check bounces after funds appear in a payee’s account, the bank may take that money back.

Preventing bounced checks

There are several strategies that may help you avoid bounced checks:

• Try to only accept checks from trusted sources: This way, you may be less likely to come across fraudulent checks.
• If you’re writing checks, keep track of your balance: If you know how much is in your account, you may avoid bounced checks due to insufficient funds. Signing up for account balance alerts may help, especially if you aren’t in the habit of checking your balance.
• Pay attention to the details: Double check the name, amount and date on any check you’re writing.

Bounced checks can be difficult to deal with for everyone involved. But with proper planning and due diligence, they can be minimized, and payments can be processed smoothly.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.