What Happens If a Payroll Check Has Non-Sufficient Funds?

Basics

When a check has non-sufficient funds, it's not paid as the check writer agreed by the bank and is returned to the bank where the check was originally deposited as uncollectable. In a payroll check, this can have adverse consequences because banks will usually immediately credit the entire check to their customer, trusting that a payroll check won't be returned for non-sufficient funds. Unfortunately, when any check is returned, it's the customer's responsibility to cover the fees associated with the return. In the case of a payroll check, in which the funds may have already been used, the customer will also be responsible to make up the entire amount of the payroll check. For example, someone deposits a $523.44 payroll check from ABC Company on Friday, and withdraws that entire amount the same day. The check is returned the next week, bringing the account to -$533.44 (most banks usually charge at least $10 for a returned check).

Working it Out

If a payroll check is returned, it's important to try to get restitution from the company immediately. Bouncing payroll checks could be a sign of impending bankruptcy, and your ultimate responsibility for the validity of any check you deposit could have you defrauded for the money you were owed for working--as well as additional money you have to spend rectifying the situation. The best thing to do is politely but insistently ask for a new check immediately, and this time take it to the bank it's drawn upon to be cashed. Then you can place the cash into your account. Be sure you are reimbursed for any returned check fees associated with the rejected deposit.

Consequences

If you're ripped off due to a non-sufficient funds payroll check and don't pay the money back to your bank, you may be reported to Chexsystems and/or Telecheck for having an overdrawn bank account. Banks are no longer sympathetic to customers who have even bounced payroll and cashier's checks, because a lot of check fraud occurs in which people create fake checks, then deposit them in hopes of getting money. If you want to avoid having difficulties writing checks at a grocery store or opening an account in the future, the best thing to do is try to work closely with your bank to pay off the debt while pursuing any legal action possible against your employer for not making good on the paycheck.