What Happens When an Electronic Check Is Returned?

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    Check Processing Services

    • Electronic check processing services can deposit your check up to three times. These services may time their redeposits on dates when you are likely to have money in your account. If your check continues to bounce, the check processing services may give the payee options for further collection on the check. The check processing company may have its own collections department that can pursue you for payment, or the check payee may just reclaim the check and approach you for payment on its own.

    Payee Policy

    • Businesses have their own policies on how they handle bounced checks. Many charge bad check fees and may have a policy of reporting checks that bounce repeatedly to the authorities. The business may decide to place your account with a collection agency or file a lawsuit against you. If a check to an individual bounces, he may incur bank fees and ask you to pay these fees. Individuals can also sue you for the amount of the check plus additional damages.

    Financial Consequences

    • When an electronic check processor redeposits your check, it may also charge a bad check fee directly to your checking account. This fee is in addition to the overdraft fee that your bank may charge every time a check is submitted against your overdrawn account. These charges add up and can create a significant financial hardship if you can't replace the funds. If your account remains overdrawn for a period of time, your bank may close the account entirely and sue you for the balance owed. Many banks report bounced checks and closed accounts to consumer information bureaus, which in turn provide reports to other banks. If bounced checks or closed accounts appear on a consumer report, you may have a hard time opening another checking or savings account for the next five years.

    Legal Consequences

    • Writing a check when you know that you don't have enough money to cover the amount is a crime. If you write a bad check to a person or business and don't make arrangements to pay your debt, you could be arrested for check fraud. The penalties for writing bad checks varies by state, but you can end up with a criminal record, fines, and possibly even do jail time.

    Preventing Bounced Checks

    • Since many businesses now convert paper checks to electronic checks, don't count on having any "float time " between the time you write a check and when your bank receives it. Don't write a check unless you know that the money to cover it is in your account. If you do inadvertently bounce a check, contact the payee immediately to make payment arrangements. By showing good faith and a willingness to make good on the check, you might be able to avoid further fees and legal problems.

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