What Causes a Check to Bounce and How to Prevent It From Happening
Bouncing checks is easy and getting easier. It may seem like a simple error to you, but banks, retailers, and others take it seriously. They’ll make your life difficult and charge hefty fees, so the best route is to avoid bouncing a check in the first place. You can even end up with criminal charges and damage to your credit.
What Causes a Check to Bounce
It’s a good idea to understand how checks are processed and why it’s gotten so easy to write bad checks.
First, everything is electronic, so things happen faster. Even if you write an old-fashioned check with pen and paper, the check might be converted to an electronic check when you hand it over to a retailer or your utility company. They don’t need to mail the check anywhere (which used to give you extra time to come up with the money). Even your friends and family can deposit checks with a mobile device right after you hand it over.
Technology also gives you more options for bouncing a check. You don’t even have to write a physical check; you may pay bills automatically from your account. When things are automated, it’s easy to lose track of how much you have and how much you’re spending. Those payments may fail if you run out of money, and they also increase the likelihood of bouncing a check at the store — unless you can remember every payment that’s deducted from your account and when the money comes out.
How to Avoid Bouncing Checks
It’s easy to bounce a check, but it’s also easy to avoid with a few good habits (which will help your finances in other ways as well)
- Balance your checking account so that you know how much you have to spend. If you don’t have the money, don’t write the check. Be sure to account for automatic deductions and online bill payments.
- Review account balances before you spend. Login to your accounts online (you can even use your mobile device). Visit an ATM for a balance inquiry or call your bank if you have to — it’s worth taking an extra moment to stop bouncing checks.
- Use a budget so that you know where every dollar goes before you even get it. Planning ahead means you can cover the necessities and keep realistic expectations about additional nice-to-have spending.
- Stop electronic payments if they’re tripping you up. The best way to understand and control your spending is to do everything manually. Once you stop bouncing checks go ahead and resume using technology. Note that you may not be able to do everything manually (or it may cost more to write checks than to use online bill pay) so you might want to pick and choose what to take offline.
- You can still use your bank's online bill payment system to pay bills, but it's best to personally look at every bill that comes in and decide when to pay it. Using online bill pay allows you to just click Submit (once everything is set up) and avoid paying postage.
- Get an overdraft line of credit for when all else fails. It’s generally the least expensive option at the bank. You can avoid bouncing checks for the most part with the steps above, but it’s a good idea to have a safety net in place.