October 24, 2024

What is a Returned Check Fee? Costs and Prevention

Checks are rare, but they’re still a go-to for large donations and rent because of their convenience and security.

Unfortunately, using checks gets tricky when your account balance is too low. If your check bounces, you could be left with high fees, a damaged financial standing, and unnecessary stress.

One way to help avoid the stress of a bounced check is using Balance Shield¹from EarnIn. If your bank balance falls below a level that you can set and adjust, you’ll receive a free, instant alert and can even have funds sent from your own earnings to help avoid overdrafts, late fees, and yes, bounced checks. And you can turn Balance Shield on or off in your EarnIn app at any time with no commitment.

But if you’re already dealing with a bounced check, here’s everything you need to know about returned check fees, what happens when a check bounces, and most importantly, how to avoid the problem in the first place.

What is a returned check fee?

Banks charge you a returned check fee when they aren’t able to process a check you’ve written. This fee, also called a bounced check fee, is the bank’s way to offset the costs of handling the check and administrative work that went into the failed transaction.

Here’s how it works. When you write a check, you’re telling the bank to transfer a certain amount of funds from your account. But if there isn’t enough money, the funds are on hold, or the account is disabled, the bank returns or “bounces” the check and charges a returned check fee.

If a check bounces, the person who wrote it gets charged. The bank typically imposes the returned check fee on your account. But in some cases, it may cause charges to the account of whoever deposits the check — known as a deposited item returned fee — which they could ask you to reimburse.

How much is a returned check fee?

So, what happens if a check bounces? How much do you have to pay? Depending on your bank's policies, the cost is somewhere between $10 and $40. Here’s what some common financial institutions charge:

U.S. Bank Easy Checking: $19
PNC Bank Standard Checking: $36
Chase Total Checking: $34
Truist One Personal Checking Accounts: No charge
Bank of America Interest Checking: $35

But there are some other costs associated that could add up and strain your finances. For example, if you’ve set up overdraft protection, your bank processes the check despite insufficient funds and covers the payment on your behalf. Overdraft fees can be quite steep, and if you’ve written multiple checks or made other transactions, each one could trigger a fee — leading to serious costs.

If you don’t have overdraft protection, the bank refuses to cover the payment. You might face a non-sufficient funds (NSF) fee, which is similar in cost to a returned item fee. Each time the bank attempts to process a check or transaction and finds insufficient funds in your account, you’ll get charged an NSF fee.

Other consequences of bounced checks

Money isn’t the only cost to know. Here are some other problems associated with bounced checks:

Closed account. Writing bad checks can make your bank lose trust in you and eventually close your account. This can also make it harder to open a new account elsewhere.
Affected credit score. If a bounced check was to pay a bill or settle a debt, the missed payment could be reported to credit agencies, leaving a negative mark on your credit report.
Difficulty securing future payments. When your checks bounce consistently, vendors and service providers could start requiring cash or electronic payment for future transactions, limiting your payment options.
Legal penalties. Depending on the situation, the recipient of the bounced check might take legal action if they don’t get the money you owe them. This could lead to fines or more serious charges.

How to avoid returned check fees

To avoid the hassle and expense of returned check fees, consider the following tips:

1. Track your account balance

Monitor your balance to make sure you have enough funds to cover the checks you write. Take advantage of your bank's online and mobile tools and double-check the balance every time, just in case. You never know if there’s a mistake or a charge you forgot was coming.

2. Make sure the check is cleared

Keep an eye on the checks you’ve issued to make sure they go through. If you realize a check hasn’t cleared yet and your funds are low, you may be able to contact your bank and request a stop payment order.

3. Set up overdraft protection

With most banks, you have the option to set up overdraft protection, which means if you don't have enough funds, the bank pays the difference for a fee. This way, you can make sure that your payments go through and avoid the hassle and repercussions of returned checks.

It's important to look into your bank's overdraft protection policy and understand the associated fees. Overdrafting can be a double-edged sword, so use it wisely and leave it as a last resort instead of a safety net. Or simply use a balance protection product like EarnIn’s Balance Shield to receive free, instant alerts and money transfers to keep your account covered.

3 steps to take if you’ve written a bad check

If you write a bad check but are lucky enough to catch the mistake in time, here are some ways to avoid a penalty:

1. Contact the receiver to stop them from depositing it

Let the receiver know what’s going on. If they haven’t deposited the check yet, ask to make alternative arrangements, like delaying the payment until you have sufficient funds or using a different method. Most people would rather avoid dealing with a bounced check and be willing to accommodate your request. This approach also allows you to maintain a good relationship with the receiver.

2. Contact the bank

If you act fast, you can place a stop payment to keep the transaction from going through. You can do this through your bank’s website or app, a phone call, or an in-person visit. Give your bank specific details about the check, including the check number, amount, name of the payee, and date it was written.

Be aware that most banks will charge a fee to complete the request. It might be more affordable than the returned check fee, but even if it isn’t, it’s often worth it to avoid the other consequences.

3. See it as a learning opportunity

The reality is that sometimes, the damage is already done. You have to pay the fee. But bounced checks can happen to anyone, and you can take steps to improve your financial habits to prevent it from happening again. Use your bank’s app or budgeting tools that alert you to low balances. And always check to make sure your account balance can cover big checks.

Tired of bounced checks and fees? Try EarnIn

Returned check fees shouldn’t interfere with your financial goals. That's why EarnIn offers quick access to the money you’ve already earned to cover your expenses without having to wait for payday. With EarnIn’s Cash Out tool, you can get up to $150/day [up to $750/pay period] with no interest, no mandatory fees, and no credit checks.² And the Balance Shield tool puts you in control of handling a low balance before it leads to a bounced check or overdraft or late fees.³

Stay on track with your finances and download EarnIn for free.

Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.

With Balance Shield, you can transfer up to $100/day (up to $750/pay period, subject to your available earnings) when your balance drops below your set threshold. Transfers have a fee and are processed within 30 minutes. Balance Shield Alerts are free and can help prevent overdrafts, but they don’t guarantee protection from third-party fees. Its effectiveness depends on your usage and bank activity. For more details, check the LS Fee Table and Cash Out User Agreement.

EarnIn is a financial technology company, not a bank. Banking services are provided by our bank partners on certain products other than Cash Out. Subject to your available earnings, Daily Max and Pay Period Max. EarnIn services may not be available in all states. EarnIn does not charge interest on Cash Outs. EarnIn does not charge mandatory fees for use of its services. Restrictions and/or third party fees may apply, for more information please review our Terms of Service available at http://EarnIn.com/TOS.