Ever sent a check to have it returned or your payment not be credited? There are lots of reasons this might have happened, like not having enough cash, getting an account name wrong or there being a problem with your signature.
Returned checks are an inconvenience but can also incur fees and charges as well as impact your credit score, so it’s important to get it right the first time. Here’s everything you need to know about returned checks and how to avoid them.
Phrases to watch out for:
Bad check – When you write a check but there isn’t enough money to cover it. If you do it by accident, you’ll get charged. If you do it on purpose, you’ll get a visit from the police.
Bounced check – When a check is returned to you by your bank (or ‘bounces’ back) because there isn’t enough money to cover it.
Returned check – When your check can’t be honored, your bank will return it to you, usually with a fee attached.
Reasons why a check can be returned
There are lots of reasons for a check to be returned, most of which can be avoided. There are a few simple things you can do to make sure your payment is successful by making sure you don’t fall into these returned check traps.
- Insufficient funds – If there’s less money in your account than the check is for, your check will bounce. Always make sure to track your spending and balance your checkbook to stop this happening.
- Out of date checks – Banks only have to honor a check for six months – after that it becomes ‘stale’. So if you’re trying to cash a check after the six months is up, you’ll probably be refused.
- The check’s been stopped – When someone hands you a check, that doesn’t mean you can always cash it. They can cancel the check with their bank or stop payment without you knowing so you can’t cash it.
- The wrong information’s on the check – Whether it’s an incorrect date, a misspelled name or a signature that doesn’t match up, the wrong information on a check could lead to it being returned too.
Will cashiers redeposit my check?
It depends. Every bank, credit union or third-party service like Kroger Money Services will have its own policy, so it’s a good idea to check their website or give them a call before you try to cash a check that’s previously been returned. They’ll be able to tell you whether your check’s still valid and if there will be any fee for depositing it again.
Remember, knowingly trying to cash a bad check is illegal, so make sure you have all the information. For example, if the check was returned because there weren’t enough funds available, ask the account holder to confirm the cash is now there.
Writing bad checks
We all make mistakes from time to time, but if you write a check knowing you don’t have the money to cover it, you could be in big trouble. Writing a bad check’s not only shady, it’s illegal, and you could face legal action and a criminal record.
But there are lots of other reasons to avoid writing a bad check – intentionally or by accident – many of which can affect you, your finances and your credit score for a long time. Aside from getting a criminal record, there are other ways that writing a bad check can affect your future:
- You’ll have to pay more – If you write a bad check, you might have to pay the person you wrote the bad check to a fee, plus the bank’s fee for returning it to you – around $60 in total. If your bank honors the check, you’ll likely get hit with an overdraft fee too.
- You’ll get ‘blacklisted’ – If the payment was to a supplier or business you rely on regularly, writing repeated bad checks could mean they view you as too much of a risk to work with you again. And that’s not great for your personal or professional reputation.
- You credit score could be affected – Going into an overdraft regularly will have an impact on your credit score, which could mean you can’t get credit elsewhere, including store credit, loans and mortgages. Even if you can find someone willing to lend to you, interest rates will be much higher, which will make your repayments bigger.
- You’ll be on banks’ bad check databases – Banks keep a record of people who write bad checks, which can mean you can’t open checking accounts or write checks. And it’s not just banks – retailers monitor your check writing history too, so they can decide whether to accept your checks in the future.
- You could end up in jail – Every state is different but writing repeated bad checks could land you in hot water. At best, you could be made to go on a mandatory education program or fined. At worst, you could be prosecuted for fraud and end up with a criminal record.
Cashing bad checks
Whether you’re cashing a check someone wrote you or trying to cash a check you wrote yourself, there are lots of dangers attached to cashing bad checks. You’ll likely get stung with fees – from your bank and even the person you’re trying to pay, plus falling behind on payments can lead to your financial issues spiraling even further out of control.
- You’ll pay for it in fees – Banks can add multiple fees for trying to cash bad checks – for dealing with the paperwork, returning it to the person who wrote it, and for unagreed credit you might be using if they honor a bad check you wrote. Plus, if your account stays in overdraft status, they could keep charging you until you pay it back.
- The person you’re paying might add a fee – Lots of businesses apply late payment charges as well as penalties for writing a bad check. If you try to cash a bad check someone else wrote you, you might also end up paying for legal help to recover what they owe you.
- You could get behind on bills – If you try to pay a bill with a bad check and it bounces, you won’t have covered your bill payment that month. Not only does that affect your credit rating, you could get behind on your bills, which can mean services like water, electricity or your cellphone get shut off.
How to protect yourself from bad checks
If you always balance your checkbook and make sure you know exactly what’s in your account, you’re still at risk from getting bad checks from other people. But there are a few things you can do to protect yourself and avoid unnecessary fees or time wasted getting what you’re owed.
- Don’t take unexpected checks – If someone you don’t know owes you money, a money order or cash are much safer options for payment. For example, if you’re selling something through your local paper or Craig’s List, accepting a check from someone you’ve never met (and will never see again) could be risky.
- Check funds are available before you take the check to the bank – If you’re accepting a check from someone you know, ask them if it’s OK to cash it before you head to the bank. It might seem a little awkward, but better that than both of you be hit with bank fees if the money’s not there.
- Only use a reputable cashier – Taking your check to a trusted cashier like Money Services, which are located in the Kroger Family of Stores, is your best bet. You can find your nearest Money Services branch with our store locator and learn more about preventing fraud in our Hub.
So, while a returned, bounced or bad check can happen to anyone, there are plenty of ways to protect yourself against writing one or trying to cash one. Always keep a watch on your finances, balance your checkbook and only write a check you know you can honor.
Need help cashing a check or want to know about other options such as money orders? Find your local store and pay us a visit today.