What is a bad check?

A bad check is a check that a bank bounces because the check issuer does not have sufficient funds on deposit. This colloquialism refers to the check being "returned" by the bank; these checks are also called "rubber checks". In the United States, changes to the way checks are processed have increased the chance of bounced checks, as check issuers can no longer rely on the so-called "float".

When someone writes a check to another person or company, that entity, in turn, deposits the check with the bank. When a bank processes deposited checks, it checks with the issuing bank that the check issuer has enough money to pay the check. If the check funding is sufficient, the deposit is made and the funds are transferred from the writer's account to the recipient's account. If the funds are not sufficient, the processing bank returns the check to the person who attempted to deposit it to let them know that the deposit was not made.

Because a lot of paperwork accompanies bounced checks, banks typically charge a fee to process them. This fee may apply to the person attempting to deposit the check or the person who issued it. In some cases, a bank will cover a bad check and then charge the writer to make up the difference in funds. Generally, when a check is returned to a person or company, action will be taken against the writer to recover the funds, as the writer has presumably already enjoyed the service that the bounced check was supposed to pay.

In some regions, people deliberately write bounced checks, based on a concept known as "float". Float assumes that it will take several days to process a check, during which time the check issuer will be able to collect and deposit the funds. necessary to cover the bad check. This practice is not advisable as many banks now use instant processing, in which case a temporary shortfall of funds can be a serious problem.

Most people try to avoid creating a bounced check because it can reflect poorly on a credit record, and repeated bounced checks can lead to a blacklist from a particular company. Landlords, for example, can demand payment of rent in the form of cash or money orders in the future if a tenant writes a bad check. Bad check fees can also increase surprisingly quickly, and the writer can be held liable for criminal actions taken on behalf of the check nominee.

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