There are numerous names for them. While widely known as a bounced check they are also referred to as a bad check, a bogus check, bouncing paper, an insufficient fund check, a kited check, an OD, an overdraft, an overdrawn account, a non sufficient fund check, a NSF check and rubber check to name a few. Whatever you want to call it, doing it will cost you a lot money if you accidentally write one.
Bouncing a check happens a lot more than you imagine. There are some 450 million bad checks written each year that bring in more than $5 billion dollars in fees and penalties to banks. The bank fees aren’t the only ones you need to worry about. Writing a bad check is a criminal act in every state can reach as high as $1000 not including court and attorney fees. All this means that taking the time to make sure you don’t write bounce a check is well worth the time and effort.
The first step to take is to balance your check book. While most people don’t view balancing a check book as technically difficult, the statistics say that you probably don’t do it. According to Moebs Services, an economic research firm, 87% of consumers don’t balance their checking accounts. The problem with not balancing your checkbook is that if you don’t know how much money is in your account, you’re much more likely to bounce a check or incur some other type of bank fee. Many people assume that they can rely on their ATM receipts to keep track of their checking balance, but these do not show outstanding checks. They may also not show debit card transactions.
Once you have your checkbook balanced, continue to do so faithfully. Get into the habit of entering all checks, automatic withdrawals, service charges, etc. when made so that you don’t accidentally forget. This is important because the bank is not your friend when it comes to taking out more money than you have in your checking account.
While knowing your balance will put you in a much better position to not bounce a check, you’ll also want to put into place some security in case a bounced check happens even with your best efforts. If you find that your account comes close to not having sufficient funds from time to time, you will want to sign up for overdraft protection. You will have to request over draft protection from the bank. Many banks now offer “courtesy overdraft protection” which you don’t have to sign up for, but courtesy overdraft protection is stacked with huge fees and doesn’t guarantee that your check will be covered like overdraft protection does.
Another step you can do to protect yourself is to make your own self imposed overdraft protection. You can do this by adding an extra $100 into your checking account, but not recording it in your balance thus giving you a $100 cushion. Another way to do this is to round all your checks up so the amount entered is more than you are actually spending. By doing this you will build a cushion into your account after a few months that can be your safety net.
You also need to be very careful of “stale checks.” These are checks that you have written, but for whatever reason they have not been cashed. While banks don’t have to honor checks that are more than 6 months old, it’s ultimately their discretion on whether or not to cash them. Most will honor the check if there is no written statement on the check that says it is only good for a certain period of time. If you have one or more stale checks in your account try contacting the person to whom you wrote the check to see why it hasn’t been cashed. If that is not possible, put a stop payment on the check.
A new way that you can get in trouble is if you have gotten into the habit of “floating checks” (writing a check when you know you don’t have enough money in your account, but knowing it will take several days before the check is recorded against your account and you’ll have the money in your account by then. People often used this float at the end of the month a couple of days before their paycheck was to be deposited). If you have been in this habit in the past, it’s a habit that you want to stop. A new law took effect last year that means the 1 to 5 day period that you used to have before money for a check you had written would be withdrawn (“the float”) from your checking account will disappear. If you don’t adjust your ways, this change will make it much more likely that you bounce a check.
By taking these precautions and making sure that your checking account balance is always up to date, you place yourself in the position to avoid bounced checks and the hefty costs that go along with them.