What Is a Returned Check Fee?

Definition and Examples of Returned Check Fees

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A returned check fee is a financial penalty charged by a credit card lender or other company when a check you wrote for payment is returned by your bank unpaid. This typically happens because your account doesn't have sufficient funds to cover the payment.

The payment you made won't be applied to your account, and your credit card issuer will charge you a returned check fee as well.

What Is a Returned Check Fee?

Lenders and other recipients of checks that are returned have the right to recoup some of the costs incurred in the process of trying to deposit them. Most states' laws provide for this. Returned check fees typically cover these costs, such as service fees charged by the lenders' banks.

Your payment might be returned unpaid by your bank to your credit card lender for a few reasons. Insufficient funds, account closure, or cancellation of the check are a few situations that could explain why your payment was returned.

The payment won't process correctly if you accidentally enter your payment information incorrectly when you pay your online or by phone, and you could be charged a returned check fee for this mishap as well.

How Returned Check Fees Work

Your returned check won't be reported to the credit bureaus if you make good on the payment, so your credit score wouldn't be impacted. The missed payment will go on your credit report and could impact your credit score, however, if 30 days pass after your due date and you still haven't made that payment.

You might receive a higher "penalty" interest rate as well if the lender lets you keep your credit card account open.

A returned check can trigger a penalty rate, the highest interest rate charged on a credit card, if you've missed a payment or had another returned check within the last six months.

The lender might well turn the matter over to a collection agency or take you to small claims court if you don't make up the payment at all, and this will show up on your credit report and affect your score.

How to Avoid Returned Check Fees

You can avoid a returned check fee by ensuring that you have enough money in your checking account to cover the payment before you make it. Be sure to balance your checkbook to take into account any transactions that might be debited from your account in the next few days.

You risk incurring a returned check fee if you're trying to "float" checks or pay bills in a certain order because you can't afford to pay everything all at once.

Monitor your checking account closely after you've mailed your credit card payment to make sure your balance can cover the payment when it's presented.

Verify that you've entered all information correctly when you're paying online via the credit card issuer's website, even if it means pulling out a physical check to confirm your checking account information.

How Much Do I Have to Pay?

Your credit card issuer might charge your account upward of $30 if you issue a check that's returned for insufficient funds. American Express charges $35.

Check your credit card terms for the exact fee and penalties for returned payments.

Keep in mind that your bank will probably charge you an overdraft fee or nonsufficient funds (NSF) fee as well, so you can add another $25 to $35 to what the returned check will ultimately cost you.

You might be able to have the fee waived or reversed if it was a one-time incident and your account history has always been positive. Call the customer service number on the back of your credit card, explain the situation, and ask that the fee be waived as a courtesy.

Key Takeaways

  • A returned check fee is a financial penalty imposed by a lender when your bank account doesn’t have a sufficient balance to cover a check you wrote for payment on the account.
  • You might also be charged a returned check fee if you make a mistake with an online or telephone payment, such as if you transpose your bank account numbers.
  • Returned check fees can be as much as $35.
  • Lenders might also increase a credit card account’s interest rate if multiple checks are returned for nonsufficient funds. 

Article Sources

  1. East Chapel Hill High School PTSA. "Returned Check Policy." Accessed Sept. 26, 2020.

  2. USDA Cooperative Extension. "What Is a Penalty APR on a Credit Card?" Accessed Sept. 26, 2020.

  3. American Express. "Table of Fees & Charges and Sample Finance Charge Computation." Accessed Sept. 26, 2020.

  4. HG.org Legal Resources. "Consequences of Writing a Bad Check." Accessed Sept. 26, 2020.