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When you don’t have enough money in your account to cover a check you’ve written, the check is bounced and “bounced”. Bouncing a check can be embarrassing and damage your reputation with the company or person you attempted to pay, and the financial consequences can be even more painful.
What is a returned check fee?
NSF checks trigger their own type of penalty. A returned check fee (also known as an NSF check fee or insufficient funds fee) is charged by your bank or credit union whenever you write a check without having enough funds in your account to pay the amount.
You are charged a fee to deter you from issuing NSF checks in the future and to compensate the bank for the paperwork associated with returning the check.
Some merchants who receive NSF checks will attempt to deposit them a second time in hopes of receiving their money. If this happens and you still don’t have enough money in your account to cover the check, your bank will charge you a fee for a second returned check.
Median charge for returned checks
Returned check fees vary by financial institution and should be avoided. Any additional bank charges will make it more difficult to meet your savings goals and daily expenses.
Here are NSF’s median fees by type of financial institution, according to the current Forbes Advisor Audit Fee Survey:
And here are the NSF fees charged to a sample of a dozen banks and credit unions in the United States:
Source: Forbes Survey of Advisor Verification Fees
Other penalties for an NSF check
If you write a check without sufficient funds, you may consider other penalties instead of or in addition to the returned check fee.
Overdraft fees. When you put your account in the red by writing a check that you can’t cover, your bank may pay the amount and charge you an overdraft fee. You will then need to transfer funds to the account to cover the check within a certain time frame. Some banks allow customers to overdraw their accounts up to a certain limit each day.
This may seem like a handy account feature, but the costs can be high. Banks charged $2.34 billion in overdraft fees in the final quarter of 2021, up from $2.32 billion a year earlier, according to S&P Global Market Intelligence.
The Forbes Advisor survey of verification fees found that this is the median overdraft fee.
Several major banks have reduced or even eliminated their overdraft fees in recent months, which means that these median fee amounts may soon decrease.
Note that if a bank charges you an overdraft fee for an NSF check, you will also not be hit with an NSF charge for the same transaction.
Some banks offer free overdraft protection, which will tap into a backup funding source, like a savings account, to prevent your checks from bouncing. You usually need to sign up for the service and link the two accounts.
Merchant Returned Check Fee. In addition to the fees charged by your bank, a business that receives an NSF check from you may charge its own returned check fee. Banks charge merchants for depositing NSF checks, so they must recover these costs and pass them on to you.
Fees vary by merchant and state, and may affect your ability to write other checks to the same business. VCI, formerly VeriCheck, offers a state-by-state list maximum returned check fee merchants are allowed to charge in the US Keep in mind that the limits only apply to businesses, not banks and the NSF check fees they charge.
Limited check writing capabilities. TeleCheck is a company that tracks people with a history of writing bad or fraudulent checks. If a merchant reports you to TeleCheck, you may have more difficulty paying by check wherever the TeleCheck check acceptance system is used.
What to do if you bounce a check
Once you realize you’ve bounced a check, don’t panic. Instead, take these steps to remedy the situation.
Contact your bank. Let the bank know that you wrote a check and realized that you don’t have the necessary funds in your account to cover the transaction. You may be able to work with your bank to transfer money from another account to pay the check and cover the fees you were charged.
Then notify the party to whom you made the check. By taking the initiative, you can demonstrate that you are a responsible customer and ask for ways to pay the amount of the check and any returned check fees the merchant may charge.
Finally, take steps to avoid future returned checks. Ask your bank about overdraft protection and whether your checking account is eligible. Make a habit of monitoring your balance using your bank’s mobile app, so you know if you have the funds to cover a check. Sign up for account alerts to notify you when your balance is too low.
And if you’re worried about being late with a payment as you practice more responsible check writing, let a supplier know ahead of time. A company might be willing to work with you so you can avoid the charge and find a solution for a slightly delayed payment.
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Bouncing a check can happen to anyone, and the fees can easily add up. To protect your finances and your ability to write checks at merchants of your choice, never write a check when you do not have enough money in your account; make sure you have overdraft protection in place on your current account; and be proactive in communicating with your bank and the check recipient whenever one of your checks is returned.