Few things are more embarrassing than a bounced check. While most people don’t issue bounced checks intentionally, fraudulent people do. Bounced checks attract penalties and criminal charges, and your harm credit history. Most banks charge NSF/overdraft fees for bounced checks, and you can expect to pay an average of $24.38, an unwelcome debit for many. Below are seven reasons your check may bounce.
1. Insufficient Funds
The most common reason for a bounced check is insufficient funds in the issuer’s account. For instance, you may draft a check for $2,000 but only have $1,000 in your bank account. The check bounces because the funds in your account cannot cover the check amount. As a result, you may give another check or settle with the recipient. If not, the receiver may initiate legal action for non-payment.
2. Incorrect Information
Many checks bounce because crucial information is incorrect. Perhaps the date is wrong, or the amount in the figures does not match one in words. The date may be illegible, disfigured, or mistaken. Signature is crucial in checks, and a mismatch between the check and bank records results in a bounced check.
3. Fraudulent Checks
Check fraud is prevalent today and includes forged checks, counterfeit checks, check kiting, and paper hanging. Some people draft checks with full knowledge that they don’t have the funds to pay for them. Check fraud is particularly common in businesses when paying for goods and services. Fraudulent checks are prone to bouncing and attract adverse repercussions, including lawsuits and reporting to consumer protection agencies.
4. Anticipated Funds
You may issue a check when you expect to receive funds in your account. A delay in the anticipated funds may result in a bounced check since the funds in your account cannot cover the check.
5. Disfigured or Damaged Checks
Consumers and businesses increasingly realize that a check’s condition can be the difference between an honored and bounced check. As such, they purchase checkbook covers to protect their checks and keep them in optimal condition. A bank may reject a damaged, torn, and disfigured check whose details are unclear and invisible.
6. Early or Delayed Deposit
You may write a check to someone, but they delay cashing it. When they finally do, you are low on funds, and your available balance is insufficient. Most banks will not cash a check older than six months and consider it stale. In this case, the issuer will have to reissue another check.
On the other hand, a postdated check may bounce when deposited before the due date. Postdated checks have a future date and must mature before they can be cashed.
7. Overwriting on Check
Like notes, you should not overwrite checks. Banks can reject checks with scribbling, correction, and overwriting since they appear suspicious. Therefore, when you want to change anything on a check, give a fresh one rather than overwrite or correct the current one.
Since a bounced check can invite penalties, reputation damage, and criminal charges, it is vital to know common reasons for it. You can avoid writing bad checks by respecting your balance, adhering to the proper format for writing a check, and utilizing your bank’s overdraft features. As a result, you avoid bounced check problems, embarrassment, and fees.