What Happens When a Check You Have Cashed Bounces?

Process

If you deposit or cash a check that has insufficient funds in the account from which it is drawn, the check will be returned, normally after it has been presented for collection twice by your bank. Your bank will reverse the transaction and subtract the check amount from your outstanding balance. The person or company that gave you the check will receive it back. She will need to present you with another check, because the old check cannot be deposited or presented for collections more than two times. You will receive a notice in the mail from your bank stating that the check has been returned, and you will be assessed a returned-check fee between $39 and $49, depending on the bank. If your checking account has a negative balance, you will need to make a deposit, otherwise you could receive a returned-check fee every time any of your other checks clear. Any charges you make with your debit card will be accepted, but you will be assessed an overdraft fee in the amount of $30 for every transaction while your balance is negative.

Ramifications

If you decide not to deposit money in your checking account and leave the negative balance, your bank will give you 60 days to make a deposit and bring the balance to a positive status. At this point, your account will be turned over to the collections department within your bank. They will try to collect the amount owed from you. After another 30 days, the account will be turned over to ChexSystems, which is a service used by banks to determine if potential customers have been abusive in the past with their checking account. You remain in their database for five years, and opening another checking account will be difficult. Some banks will allow you to open a checking account once the amount owed is paid, even though you are still in the ChexSystems database. Other banks will require you to pay the amount owed and wait for the five years to lapse before you can open a checking account. This policy will vary from bank to bank. Some banks will send you to ChexSystems based on a computer-generated decision. They consider your history with the bank, including factors such as previous returned-check fees and other abusive practices.

Options

You can apply for overdraft protection, which is a line of credit which will prevent you from receiving an overdraft or returned-check fee. When you apply for overdraft protection, the bank will process your application just like they do any other credit product. If you are approved, you could receive a line of credit in the amount of $300 to $1,500 or more. If a check is returned for insufficient funds, the funds will be pulled from your overdraft protection account. These accounts will charge an annual fee of $20, and the money borrowed from this account could have an annual percentage rate of 19.6 percent.