What is a 'bad' check, and what happens if you write or cash one?
What is a 'bad' check, and what happens if you write or cash one?.
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A "bad check" is not just an inconvenience. From overdraft fees to returned payment charges and even legal issues, the consequences of writing or cashing a bad check can be costly.
Here's what causes a check to bounce , what happens when it does, and how to avoid the problem in the first place.
A bad check is a check that your bank can't cash, or that requires the bank to reverse the transaction after you cash it. Reasons a check might be bad include:
There are insufficient funds in the check issuer's account to cover the transaction
The issuing account is nonexistent or was closed by the check issuer or bank
The issuer placed a "stop payment" on the check without a valid reason
In some cases, if you cash a bad check, it will clear. In other words, the transaction will be completed and the money will be deposited into your bank account. But later, when the problem with the check is discovered, the bank may remove the funds from your account and charge you a fee.
Intentionally writing a bad check is a crime. However, some people accidentally write bad checks, not realizing their account will be short on funds when the check is deposited.
Depending on the circumstances, the repercussions for writing a bad check can include any or all of the following:
You'll incur a late fee from the company or service provider if your payment doesn't go through on time.
If you miss a loan or credit card payment, it will damage your credit scores.
If the check bounces due to lack of funds, you and the recipient can be charged NSF fees .
You'll likely be charged an overdraft fee if the bank has to cover the transaction and a returned check fee of around $35.
The recipient can sue you for the money, plus their bank fees and damages.
The merchant might refuse to accept your checks in the future.
You may be required to attend counseling or a money management class.
While writing an NSF check is usually a civil matter, forging or counterfeiting a check is a serious criminal issue. Depending on the state you live in, you could pay penalties of up to several thousand dollars and/or serve several years in prison if you're convicted of issuing multiple bad checks.
