Bank Regulations on Non Sufficient Fund Checks

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A bank does not honor your check if your account has insufficient funds
A bank does not honor your check if your account has insufficient funds (Image: check in macro image by Alexey Klementiev from Fotolia.com)

You may write a check without being aware that there is not enough money in your bank account to cover the check amount. Or you may receive a check that is not paid out by the bank, commonly called a "bounced check", because the person who paid you did not have enough funds in his account. Banks have some procedures to deal with these “non-sufficient fund” checks. Federal regulation passed in 2010 allows you to specify, by opting in, if you want overdraft protection on your debit card or ATM transactions, however, this feature does not extend to overdrawn checks.

Notification Requirements

The bank need not notify you immediately that your check has bounced because your account is overdrawn. This means you may not come to know about this until you receive your monthly statement. Read your bank's disclosure agreement . You may find that your bank doesn’t require any immediate notification of such an event.

Order of Payments

You should always look into your bank’s specific policies to find out what payment order they follow. Some banks pay out smaller payments first believing that this will result in fewer overdrafts. Others pay out larger payments first, considering that the more important payments, such as rent or mortgage, should take priority.

Maximum Fee Limit

Each bank has its own policy on the fee it will charge for a bounced check. You will have to look into your account agreement to find out what your bank will charge you for a “non-sufficient funds" transaction. The National Automated Clearing House Association rules state that If a paper check is returned, the electronic version of the check can’t be presented for payment more than twice. If the paper check has been presented twice then, NACHA rules state, the electronic check cannot be presented more than once.

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