The Causes of Returned Checks

Lack of money is only one cause for returned checks.
Lack of money is only one cause for returned checks. (Image: Jupiterimages/Comstock/Getty Images)

When you pay by check you take the risk that the check, for a variety of reasons, could be returned to you by the recipient. Opening your mail to find your check returned can be an alarming experience, especially if money was due by a particular deadline. Consider all the possible causes for your returned check so that you can send the money back out promptly.

Insufficient Funds

The first thing many people do upon receiving a returned check is consult their checking accounts to rule out the possibility of a bounced check. When you have insufficient funds in your checking account, and the recipient of your check attempts to cash or deposit your check, both he and you will be faced with a problem. If you do not have enough money in the account, the other party will not be able to withdraw your funds. As a result, your check will be returned, and your money will not have made it to where it was supposed to go. You may incur insufficient funds charges from your bank, as well as late charges from your creditor.

Missing Signature

Many times, people to forget to sign a check due to the rush of getting it out in the mail. A missing signature is a definite cause for your check to be returned to you. Without your signature, a bank will not honor the check when it is taken to be cashed or deposited. As a result, the check must be mailed back to you to sign. Most of the time the recipient of an unsigned check will not bother bringing it to the bank since he will already know that the check is useless without a signature. Therefore, you will probably get the check returned directly from the person to whom you sent it.

Missing Endorsement

You can have a check returned to you because the depositor forgot to endorse it prior to sending it to his bank for deposit. The endorsement goes on the back of a check and is necessary in order to complete the transaction. A missing endorsement will delay the transaction as the check will be mailed back to the original account holder -- you. Your job will be to resend the check to the depositor with a request for him to endorse the check.

Stop Payment

If you send out a check, but need to cancel the transaction before it is made, you can contact your bank and order a stop payment. This means that when your check is received, the transaction will not be completed; no funds will be withdrawn from your account, and your check will be returned to you with a "stop payment" stamp on it. You cannot reauthorize the same check to be cleared once it has a "stop payment" stamp. If you wish to continue the transaction, you will have to write a new check.

Unmatched Records

A check can be returned to the account holder if a check has unmatched records. Unmatched records means that the account number is not linked to the person who signed the check. The returned check is sent back to the original account holder as a risk management issue to minimize the potential of fraud. This can occur if a wife signs a check that is linked to her husband's account, but she is not named on the account.

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