Finschool By 5paisa

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The term “bounced check” refers to a cheque that cannot be cashed because there are insufficient funds (NSF) in the account. These checks, also referred to be rubber checks, are returned by banks instead of being honored, and the check writers are assessed NSF fines.

Passing bad checks is against the law and, depending on the amount and whether the action includes crossing state lines, the offence can vary from a misdemeanor to a felony. When a check bounces, the depositor’s bank does not honor it, which may lead to charges and banking limitations.

Negative credit score points, retailers refusing to accept your checks, and even legal trouble are further consequences for bounced checks.

In order to minimize unintentional check bounces, banks frequently provide overdraft protection.

An NSF fee is assessed to the account holder when a bank decides to bounce a check because there are not enough funds in the account. The bank assesses an overdraft (OD) fee if it accepts the cheque, but it results in a negative balance on the account. The bank may impose an extended overdraft fee if the account continues to be negative.

The costs for returned checks and overdrafts vary between banks, however as of 2020, the average overdraft fee was $33.47. This fee is typically applied to drafts of $24 or more, which can include cheques, electronic payments, and some debit card transactions.

A bounced check could cost you money, prevent you from writing more checks, and harm your credit rating. You can also be prohibited from paying suppliers with checks in the future if you write too many checks that bounce. Many businesses utilize TeleCheck, a check verification system, to help them ascertain whether a customer’s check is valid. The merchant will deny your check and request another form of payment if this system links the check you just provided for payment to a history of unpaid checks.

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