Thanks to online bill pay, debit cards, and peer-to-peer transfers, you may not reach for a physical checkbook too often. But more than 50% of Americans still write paper checks, particularly when paying contractors and landlords, making charitable contributions, and paying taxes.¹
Paper checks can be useful, so it’s valuable to know how to write a check – and it’s equally important to know what happens if you don’t have the money in your bank account to cover your check. If you accidentally write a bad check, you could owe a return payment fee, also called a returned check fee or return item fee. In some cases, you also may have to pay an overdraft penalty for exceeding the balance in your account.
But what is a return fee? Here’s what you need to know. We’ll walk you through how these fees work, how much they can cost, and how you can prevent them.
What is a returned check fee?
A returned check fee is what your financial institution charges when you write someone a check, but there aren’t enough funds in your account to cover it.
The recipient may not to be able to cash the check or their deposit may be rejected when their bank is unable to collect the funds from your bank. This is called a “bounced check.” When this happens, your financial institution may charge you a bounced check fee.
This may lead you to ask: “how long does it take for a returned check to come back?” The timing can vary . You should contact your financial institution for assistance on timelines related to insufficient funds in your checking account.
Depending on your financial institution, a bounced check fee may also be called a return payment fee, a return item fee, or a non-sufficient funds (NSF) fee. If that last one sounds familiar, you may have been charged an NSF fee after swiping your debit card for more money than you had in your bank account.
Some banks and credit unions allow you to overdraw your account, meaning they’ll cover the excess cost of your bad check. But you’ll have to pay the money back to the bank. You also may have to pay an overdraft fee or payment return fee if your check bounces.
How much do return fees cost?
Returned check charges vary by financial institution, but costs can range from $10 to $50. One recent survey found fees as high as $36 at major banks. The median return check fee cost was $12 across all financial institutions.2
The cost of overdraft fees is similar to returned check fees, but these can also vary by institution. Overdraft fees can reach $35, but the average fee has dropped to around $15. The cost has been declining because some financial institutions have reduced or eliminated these fees.3
In addition to return payment fees or overdraft fees, you might owe late fees to the recipient of your bounced check. Many landlords, utility companies, and contractors have policies about bounced checks and will expect prompt payment – including a penalty – if your check doesn’t clear.
Unfortunately, there’s more than the financial cost to consider when writing a bad check. Bouncing a check also can hurt your relationship with your bank. While financial institutions don’t report returned payments to credit bureaus, they may report them to consumer reporting agencies like ChexSystems. Negative marks on your ChexSystems report can make it more challenging to open new bank accounts down the road.
Learn more about bank fees and how to avoid them.
How to prevent returned check fees
The best way to prevent a returned check is to make sure you have enough money in your checking account before writing the check. The recipient may not cash or deposit the check right away, so you’ll need to monitor your account online and/or your monthly paper bank statement. Keep enough money in your checking account to cover the check until it’s cleared.
But what if you wrote a check and, after handing it over, realize you don’t have the money to cover it? Here are some suggestions for working with your financial institution to prevent returned check fees:
1. Make sure the check has cleared
If your check has not yet cleared, you can request a stop payment on the check. To do so, contact your financial institution and ask them to cancel the check. This may, however, result in a separate fee – and you’ll still have to figure out how to pay whomever you wrote the check to in the first place.
2. Contact the recipient
To avoid a stop payment fee, try contacting the payment recipient instead of asking your bank to cancel the check. If it’s a friend or family member, call them and ask them to wait to deposit or cash the check.
If you used a check to pay your landlord or a contractor, you may have less luck getting them to delay depositing it. But, if they accept other forms of payment – such as credit cards – you can request to pay that way and have them void the check.
Just be careful that you don’t end-up with high-interest credit card debt. Using a credit card that you cannot pay-off can quickly become more expensive than a single returned check fee.
3. Contact your financial institution
If the damage is already done and the returned item fee has appeared on your bank statement, try calling your financial institution and explaining the situation. If this is your first mistake, or you’ve been a long-time customer, they may waive the fee. Banks aren’t required to waive this fee, though, so it pays to be polite when talking to the customer service representative.
4. Make a deposit to cover the check
If you realize you don’t have enough funds in your checking account to cover a check you’ve just written – but you have money in another account – act quickly to transfer the funds into your checking account.
If the money is in a connected savings account at the same bank, you may be able to launch your mobile banking app and instantly transfer the funds. Alternatively, go to the nearest branch or ATM to deposit cash into your checking account.
5. Opt into overdraft protection
Your bank or credit union may offer overdraft protection, which can backstop whatever portion of the check you don’t have the funds to cover. This can be from another open account of yours or, in some cases, based on future direct deposits. This can help you avoid non-sufficient funds costs. But some financial institutions may charge you for overdraft protection.
Other consequences of returned checks
In addition to fees, bounced checks can indirectly impact your credit score. While returned checks are not reported to credit agencies, they can cause damage if the unpaid debt is sent to collections. A debt that goes into collection is reported to credit bureaus. This can lead to a negative mark on your credit report, which can lower your credit score.
Multiple bounced checks may also prompt your bank to close your checking account – especially if the incidents are frequent or unresolved. A closure can make it more difficult to open a new account elsewhere, as banks may report this information to agencies that track banking mismanagement issues.
Ultimately, returned checks can strain both your finances and reputation. This highlights the importance of responsible financial management.
Know your account balance to avoid fees
Return check fees can be costly, creating a headache for you and the person or business you owe money to. To avoid these fees, always confirm your account balance before writing a check to ensure you have enough money to cover the cost. If you’re tired of dealing with bank fees that drain your funds, switch to a checking account with no monthly fees, like Chime.
FAQs
Can a returned check affect my credit score?
While returned checks themselves are not reported to credit bureaus, unpaid debts from bounced checks that are sent to collections can negatively impact your credit score.
What happens if I write a check without enough funds?
If you write a check without sufficient funds, the check may bounce, resulting in bank fees, potential late fees from the recipient, and possible damage to your banking reputation.
How can I avoid returned check fees?
To prevent returned check fees, be sure your account has sufficient funds before writing a check, monitor your balance regularly, and consider options like overdraft protection.
What is a returned check fee?
A returned check fee is charged by a financial institution when a check is written without sufficient funds in the account to cover it, often referred to as a “bounced” check.
What should I do if I realize I wrote a bad check?
Act quickly by contacting the recipient or your bank, making a deposit to cover the check, or requesting a stop payment to avoid additional fees and complications.